An interesting article in the Telegraph yesterday. See link below. Essentially it is about Britain's best performing fund manager, and some of his stock picks for 2014. Not surprisingly he is backing a number of Aim listed shares. I say not surprisingly because not only can Aim listed companies be held in ISA's now, but in April trading on the Aim market will be exempt from Stamp Duty. For frequent traders this could potentially save them a not inconsiderable amount of money. There is quite a bit of rubbish listed on Aim, but with all stock picking it's a matter of choosing judiciously. Here's the article and some of his stock picks for 2014:-
http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10542145/Britains-best-performing-fund-manager-picks-his-favourite-shares-for-2014.html
A happy, healthy and prosperous New Year to all.
Tuesday 31 December 2013
Astrazeneca, Barclays, Drax and Debenhams (trading statement)
Continuing with my look at the Telegraph's 2014 share tips, I thought I'd have a look at AstraZeneca, Barclays and Drax.
In truth, I'm not that interested in delving into the figures of larger companies, there are plenty of analysts out there who are paid handsomely to do that job. However, it is worth a quick look to see whether or not these companies are near there highs or lows, what the p/e ratios are and what sort of dividends they are paying, if any?
Starting with AstraZeneca. With the briefest analysis, I would say that AZN is a very solid buy for income. The dividend has steadily grown from 70 cents in 1999 to 280 cents presently. Whilst the dividend hasn't grown every year, neither does it appear to have been cut. The current dividend represents a near 5% yield. The p/e ratio is around 12 which is probably about right. I notice that this is one where the tipster refers to it being cheap against sector peers. I mentioned this in yesterday's blog, it may just mean that Glaxo and Shire are expensive? I would personally never use relative performance as any guide. How happy would you be if you invested in a fund that told you that they had done well relative to their sector peers because they had only lost 90% of your money whilst the others would have lost all of it? In conclusion, AZN looks like a relatively safe haven to park your money for a reasonable income stream, but I personally wouldn't expect fireworks this year.
I can't see anything particularly attractive about Barclays from a quick glance, although the financials appear to indicate plenty of cash and a tangible asset value somewhere around the current share price. The dividend is a miserly 2.4%. However, I usually steer well clear of the financial sector, particularly the larger companies. I once parked quite a large amount of money in Lloyd's Bank when it was paying a 7% dividend. I only left it there a while to collect the dividend and then sold for a modest profit. This was around 2003, it never for one moment crossed my mind that this was such a risky move. How foolish and how lucky I was in retrospect. You tend to hear a familiar mantra about very small companies being far more risky than the mega-caps. I tend to disagree, it's the nature of the business, the management and most of all (imo) the financials which dictate the risk.
Finally Drax. I can't see the appeal here, although for momentum traders the chart is in a clear uptrend. The valuation is not particularly attractive for me with a p/e of 18, and a dividend yield of just over 3%. Again I can't see any justification for substantial rises in it's share price this year since broker forecasts suggest EPS of 29p and 35p in 2013 and 2014 respectively putting the shares on forward p/e ratios of 27 and 23. In fairness, a recent trading update said that EBITDA would come in materially ahead of expectations for 2013.
In other news I notice that Debenhams have issued a poor trading statement today. Is this a portent of further disappointing news from some of the well known high street retailers? Perversely, it may be a company I'll add to the monitor since it states an intent to keep paying a dividend (currently getting towards 5%), although they are abandoning their share buyback programme which isn't such a good sign. I do wonder what the future holds for our high streets? The success of ASOS and others suggests that over the longer term, companies like Debenhams, M&S etc might be fighting a losing battle unless they can successfully execute substantial online operations whilst reducing their high street presence. This of course will be a costly process.
As ever, no advice is intended or given.
In truth, I'm not that interested in delving into the figures of larger companies, there are plenty of analysts out there who are paid handsomely to do that job. However, it is worth a quick look to see whether or not these companies are near there highs or lows, what the p/e ratios are and what sort of dividends they are paying, if any?
Starting with AstraZeneca. With the briefest analysis, I would say that AZN is a very solid buy for income. The dividend has steadily grown from 70 cents in 1999 to 280 cents presently. Whilst the dividend hasn't grown every year, neither does it appear to have been cut. The current dividend represents a near 5% yield. The p/e ratio is around 12 which is probably about right. I notice that this is one where the tipster refers to it being cheap against sector peers. I mentioned this in yesterday's blog, it may just mean that Glaxo and Shire are expensive? I would personally never use relative performance as any guide. How happy would you be if you invested in a fund that told you that they had done well relative to their sector peers because they had only lost 90% of your money whilst the others would have lost all of it? In conclusion, AZN looks like a relatively safe haven to park your money for a reasonable income stream, but I personally wouldn't expect fireworks this year.
I can't see anything particularly attractive about Barclays from a quick glance, although the financials appear to indicate plenty of cash and a tangible asset value somewhere around the current share price. The dividend is a miserly 2.4%. However, I usually steer well clear of the financial sector, particularly the larger companies. I once parked quite a large amount of money in Lloyd's Bank when it was paying a 7% dividend. I only left it there a while to collect the dividend and then sold for a modest profit. This was around 2003, it never for one moment crossed my mind that this was such a risky move. How foolish and how lucky I was in retrospect. You tend to hear a familiar mantra about very small companies being far more risky than the mega-caps. I tend to disagree, it's the nature of the business, the management and most of all (imo) the financials which dictate the risk.
Finally Drax. I can't see the appeal here, although for momentum traders the chart is in a clear uptrend. The valuation is not particularly attractive for me with a p/e of 18, and a dividend yield of just over 3%. Again I can't see any justification for substantial rises in it's share price this year since broker forecasts suggest EPS of 29p and 35p in 2013 and 2014 respectively putting the shares on forward p/e ratios of 27 and 23. In fairness, a recent trading update said that EBITDA would come in materially ahead of expectations for 2013.
In other news I notice that Debenhams have issued a poor trading statement today. Is this a portent of further disappointing news from some of the well known high street retailers? Perversely, it may be a company I'll add to the monitor since it states an intent to keep paying a dividend (currently getting towards 5%), although they are abandoning their share buyback programme which isn't such a good sign. I do wonder what the future holds for our high streets? The success of ASOS and others suggests that over the longer term, companies like Debenhams, M&S etc might be fighting a losing battle unless they can successfully execute substantial online operations whilst reducing their high street presence. This of course will be a costly process.
As ever, no advice is intended or given.
Monday 30 December 2013
Monitise, Home Retail Group and Imagination Technologies
Following on from yesterday's share tips in the Sunday Telegraph, I thought I'd now add some numbers to Monitise, Home Retail and Imagination Technologies.
Starting with Monitise, it certainly appears to be in the right place at the right time, and according to yesterday's article it's now a FTSE-250 company which provides the technology for mobile banking to 350 financial institutions worldwide. Great story, however for me there is a big "BUT" coming with this one.
The market cap. is currently a staggering £1.1billion. That's an awful lot of expectation already priced in. Now I'll freely admit that sometimes growth companies early results are deceptive, and revenues and profits can suddenly jump very significantly justifying a seemingly ludicrous share price. However, the simple mathematics are these. At a market cap of £1.1 billion and were I to give it a very generous p/e ratio of 50, then this implies profits of £22million. Currently Monitise is loss making. Net tangible assets are around 3p compared to a share price of 67.5p.
Good luck with this one if you're a shareholder, but it's not for me. By the way, if anybody compares the valuation to Twitter (or something similar) then my reply would be so what? One silly valuation doesn't justify another. In fact sometimes you do hear share prices justified by comparison, for instance share xyz is cheap compared to it's sector peers. What a nonsense that is. It could just mean that the whole sector is grossly overvalued including company xyz.
As I've said in many previous blogs, I would never short shares because they can stay on very high valuations for many years (ASOS is a good example), but unless I'm very badly mistaken I can't see any justification in the numbers for the current share price never mind any further increases this year. I'm happy to be proved wrong though.
Home Retail group is more my kind of investment, although I do feel I've missed the boat to a certain extent with this one. Nobody wanted to know this company during the dark days of the recession for a variety of reasons, not least the business model of it's Argos stores. However, as the article says it is now sensibly using it's stores as collection points for online orders.
Home retail has solid tangible asset backing at around 130p per share, and although the current dividend yield is less than 2%, they do have a track record of paying decent dividends and if retail conditions improve further dividend hikes are possible.
I'm not tempted to buy the shares at the current price, but certainly missed out when they were hovering around their lows at about 50p. Experience has taught me that if a company has solid tangible assets, and it begins to show recovery or (better still) signs of growth then the share price more often than not catches up with asset value and normally moves above it in the longer term.
Finally, Imagination Technologies has been in the doldrums this year and the share price has come back from over £5 to under £2. I'll stick my neck out here and guess that the share price will recover the ground that it has lost. I like these types of companies. Why? Although I can't justify the share price on the metrics I have used above, gross margins are around 86% which has a massive effect on the bottom line as revenue growth really starts to kick in. It's fantastic if you can spot these success stories when they are starting out.
As ever, no advice is intended or given, and in particular I have not researched these companies in any depth, just a quick glance at the financials.
N.B. For balance I should add that Monitise also has high gross margins. Around 76% in their latest set of prelims. It depends how quickly that they can grow revenues I suppose, but £1.1 billion is still a very hefty valuation at this stage in my opinion.
Starting with Monitise, it certainly appears to be in the right place at the right time, and according to yesterday's article it's now a FTSE-250 company which provides the technology for mobile banking to 350 financial institutions worldwide. Great story, however for me there is a big "BUT" coming with this one.
The market cap. is currently a staggering £1.1billion. That's an awful lot of expectation already priced in. Now I'll freely admit that sometimes growth companies early results are deceptive, and revenues and profits can suddenly jump very significantly justifying a seemingly ludicrous share price. However, the simple mathematics are these. At a market cap of £1.1 billion and were I to give it a very generous p/e ratio of 50, then this implies profits of £22million. Currently Monitise is loss making. Net tangible assets are around 3p compared to a share price of 67.5p.
Good luck with this one if you're a shareholder, but it's not for me. By the way, if anybody compares the valuation to Twitter (or something similar) then my reply would be so what? One silly valuation doesn't justify another. In fact sometimes you do hear share prices justified by comparison, for instance share xyz is cheap compared to it's sector peers. What a nonsense that is. It could just mean that the whole sector is grossly overvalued including company xyz.
As I've said in many previous blogs, I would never short shares because they can stay on very high valuations for many years (ASOS is a good example), but unless I'm very badly mistaken I can't see any justification in the numbers for the current share price never mind any further increases this year. I'm happy to be proved wrong though.
Home Retail group is more my kind of investment, although I do feel I've missed the boat to a certain extent with this one. Nobody wanted to know this company during the dark days of the recession for a variety of reasons, not least the business model of it's Argos stores. However, as the article says it is now sensibly using it's stores as collection points for online orders.
Home retail has solid tangible asset backing at around 130p per share, and although the current dividend yield is less than 2%, they do have a track record of paying decent dividends and if retail conditions improve further dividend hikes are possible.
I'm not tempted to buy the shares at the current price, but certainly missed out when they were hovering around their lows at about 50p. Experience has taught me that if a company has solid tangible assets, and it begins to show recovery or (better still) signs of growth then the share price more often than not catches up with asset value and normally moves above it in the longer term.
Finally, Imagination Technologies has been in the doldrums this year and the share price has come back from over £5 to under £2. I'll stick my neck out here and guess that the share price will recover the ground that it has lost. I like these types of companies. Why? Although I can't justify the share price on the metrics I have used above, gross margins are around 86% which has a massive effect on the bottom line as revenue growth really starts to kick in. It's fantastic if you can spot these success stories when they are starting out.
As ever, no advice is intended or given, and in particular I have not researched these companies in any depth, just a quick glance at the financials.
N.B. For balance I should add that Monitise also has high gross margins. Around 76% in their latest set of prelims. It depends how quickly that they can grow revenues I suppose, but £1.1 billion is still a very hefty valuation at this stage in my opinion.
Sunday 29 December 2013
Share tips for 2014
I notice that the Sunday Telegraph have published their share tips for 2014 in today's paper which include the following companies:-
Barratt Developments
Monitise
AstraZeneca
Drax
Chemring
Home Retail Group
RSA group
Firstgroup
Imagination Technologies
Barclays
I must confess that I generally ignore tips in newspapers, and anywhere else for that matter, but in fairness their picks for 2013 did well with an average gain of 54.53%.
http://www.telegraph.co.uk/finance/markets/10540409/The-Telegraphs-share-tips-for-2014.html
The rational for each tipsters choices are generally well written, but as with all newspaper articles they rarely refer to the all important underlying figures that are always my first point of call before I delve further into their businesses and prospects.
What I have decided to do then is have a brief look at the figures for these companies.
I'll start with Chemring, a company I mentioned at about this time last year:-
http://michae1mouse.blogspot.co.uk/2013/01/new-year-resolution.html
The share price looks like it hasn't moved much during that time, although savvy traders might have made double digit profits as the share price originally moved above 300p before a rather abrupt retrace.
So what are the figures for Chemring? Do they back up the reporters optimism for 2014? Well firstly this is a company that has paid regular dividends to shareholders in the past. In fact they have paid out as much as 50p per share in 2010 which is almost a quarter of the current share price (special dividend?). Last year's dividend was less generous at 9.5p or 4.4%, not bad, but of course it may fall further this year. Nevertheless, I do like companies that have tried to adopt a progressive dividend policy. If the good times roll again then you can expect dividend hikes.
The NAV (from Advfn figures) is around 224p which is above the current share price. However, if you strip out the intangibles then TNAV is just 10.5p. In a fire-sale intangibles are absolutely worthless, and hence if Chemring were to get into real trouble then don't expect to get any of your money back.
They also have high levels of debt, although I notice that net debt fell by £45m in the quarter to 31 October, at £249m it is around the same levels as last year.
Heavily indebted companies with little asset backing are not really my cup of tea, although in certain circumstances and with the right conditions and some good fortune these companies can turn out to be an excellent punt. A recent example would be Thomas Cook Group which at one point looked in real trouble. A risky strategy, but it can pay off handsomely at times.
Overall, it appears to be a highly cash generative company, although I did notice there was a small cash outflow reported in the interims.
It's the sort of company that would possibly interest me if the share price were to fall much further since the risk/reward would be far more attractive to me, but at present I'll not be investing. I could quite easily see the share price moving upwards though with some strategic disposals and improved trading. As the report suggests there is also the possibility of a suitor, although I wouldn't like to guess the price that any offer would be pitched at.
As ever, no advice is intended or given.
P.S. I don't have holdings in any of these companies.
Barratt Developments
Monitise
AstraZeneca
Drax
Chemring
Home Retail Group
RSA group
Firstgroup
Imagination Technologies
Barclays
I must confess that I generally ignore tips in newspapers, and anywhere else for that matter, but in fairness their picks for 2013 did well with an average gain of 54.53%.
http://www.telegraph.co.uk/finance/markets/10540409/The-Telegraphs-share-tips-for-2014.html
The rational for each tipsters choices are generally well written, but as with all newspaper articles they rarely refer to the all important underlying figures that are always my first point of call before I delve further into their businesses and prospects.
What I have decided to do then is have a brief look at the figures for these companies.
I'll start with Chemring, a company I mentioned at about this time last year:-
http://michae1mouse.blogspot.co.uk/2013/01/new-year-resolution.html
The share price looks like it hasn't moved much during that time, although savvy traders might have made double digit profits as the share price originally moved above 300p before a rather abrupt retrace.
So what are the figures for Chemring? Do they back up the reporters optimism for 2014? Well firstly this is a company that has paid regular dividends to shareholders in the past. In fact they have paid out as much as 50p per share in 2010 which is almost a quarter of the current share price (special dividend?). Last year's dividend was less generous at 9.5p or 4.4%, not bad, but of course it may fall further this year. Nevertheless, I do like companies that have tried to adopt a progressive dividend policy. If the good times roll again then you can expect dividend hikes.
The NAV (from Advfn figures) is around 224p which is above the current share price. However, if you strip out the intangibles then TNAV is just 10.5p. In a fire-sale intangibles are absolutely worthless, and hence if Chemring were to get into real trouble then don't expect to get any of your money back.
They also have high levels of debt, although I notice that net debt fell by £45m in the quarter to 31 October, at £249m it is around the same levels as last year.
Heavily indebted companies with little asset backing are not really my cup of tea, although in certain circumstances and with the right conditions and some good fortune these companies can turn out to be an excellent punt. A recent example would be Thomas Cook Group which at one point looked in real trouble. A risky strategy, but it can pay off handsomely at times.
Overall, it appears to be a highly cash generative company, although I did notice there was a small cash outflow reported in the interims.
It's the sort of company that would possibly interest me if the share price were to fall much further since the risk/reward would be far more attractive to me, but at present I'll not be investing. I could quite easily see the share price moving upwards though with some strategic disposals and improved trading. As the report suggests there is also the possibility of a suitor, although I wouldn't like to guess the price that any offer would be pitched at.
As ever, no advice is intended or given.
P.S. I don't have holdings in any of these companies.
Friday 27 December 2013
Proposed share buy-back and implications for future dividend payments at Avesco
In a short follow-up to my comments about Avesco's recently announced distribution of the Disney proceeds to shareholders, and in particular the share buyback, I just wanted to add my further thoughts about future shareholder returns.
Firstly, at 217.5p per share (pre-Disney payout) shareholders will receive a 52% dividend within 4 months (114p) which currently implies that post Disney and final dividend pay-outs, the shares are worth 103.5p (217.5p-114p) or a £19m market cap.
As mentioned previously this leaves the shares at a very substantial discount to NTAV. The even year effect in 2014 is more than likely to put the company back on track after a disappointing 2013.
Moreover, the company have increased the dividend by 25% this year (from 4p to 5p), and have stated their intent in pursuing a progressive dividend policy. This is interesting since the reduction in the share capital (assuming the share buy-back goes ahead) from 25.9m to 18.3m implies that a maintained dividend would actually equate to around 7p next year (25.9m*5p=£1.3m, 18.3m*7p=£1.3m). In fact a 7p dividend next year would be marginally less expensive. If Avesco are truly going to implement a progressive dividend policy then is it possible that next year's dividend could be 8p plus? It will be interesting to see.
The way I see it, the company have effectively returned pretty much all of the cash from Disney to their shareholders. The buy-back increases each shareholder's stake by approximately 41%. Despite having being an investor in Avesco for more than four years, and although I have benefitted from substantial share price gains and large pay-outs, I still see the company as well below fair value.
Investor's should also take a peek at their website to view the circular re: return of £1.10 and share buyback:-
http://avesco.com/node/355
and this is also worth a watch:-
http://www.ct-group.com/news/nuformer-and-ct-team-Philips
As ever, no advice intended or given.
Firstly, at 217.5p per share (pre-Disney payout) shareholders will receive a 52% dividend within 4 months (114p) which currently implies that post Disney and final dividend pay-outs, the shares are worth 103.5p (217.5p-114p) or a £19m market cap.
As mentioned previously this leaves the shares at a very substantial discount to NTAV. The even year effect in 2014 is more than likely to put the company back on track after a disappointing 2013.
Moreover, the company have increased the dividend by 25% this year (from 4p to 5p), and have stated their intent in pursuing a progressive dividend policy. This is interesting since the reduction in the share capital (assuming the share buy-back goes ahead) from 25.9m to 18.3m implies that a maintained dividend would actually equate to around 7p next year (25.9m*5p=£1.3m, 18.3m*7p=£1.3m). In fact a 7p dividend next year would be marginally less expensive. If Avesco are truly going to implement a progressive dividend policy then is it possible that next year's dividend could be 8p plus? It will be interesting to see.
The way I see it, the company have effectively returned pretty much all of the cash from Disney to their shareholders. The buy-back increases each shareholder's stake by approximately 41%. Despite having being an investor in Avesco for more than four years, and although I have benefitted from substantial share price gains and large pay-outs, I still see the company as well below fair value.
Investor's should also take a peek at their website to view the circular re: return of £1.10 and share buyback:-
http://avesco.com/node/355
and this is also worth a watch:-
http://www.ct-group.com/news/nuformer-and-ct-team-Philips
As ever, no advice intended or given.
Monday 23 December 2013
Avesco returns cash and buys back 30% of it's shares from Taya
I must admit to feeling just a little bit queasy when I saw that Avesco had released two news statements at just after 5pm this evening. Normally this doesn't signify good news!
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
Saturday 21 December 2013
Trakm8 interims, and brief updates
As anticipated in last week's blog, Trakm8 released their interim results this week.
The headline figures show that revenues increased by 10% to £2.564m, combined UK and International orders received increased by 28%, and underlying annualised recurring revenues increased by 15% to GBP2.3m. The company continues to maintain profitable growth with an operating profit before exceptional costs of £87,000, gross margins increasing slightly to 75% whilst they retained strong cash balances.
The figures are very healthy and encouraging, but it is the forward looking statements that have greater significance following the "transformational acquisition of BOX Telematics Ltd completed in October 2013". In the year ended 31 December 2012, BOX recorded revenues of GBP8.4 million and profit before tax of GBP850,000.
In the forward looking statement John Watkins, Executive Chairman of Trakm8 said:
"We expect to deliver on the investments in resources over the next year and to deliver strong growth in profitability on the back of the much larger Group revenues, in line with our expectations."
Broker forecasts are for revenues of £10.9m in 2014 with EPS of 2.3p and £16.9m in 2015 with EPS of 4p. This gives forward P/E figures of 15 and 8.5 respectively. The figures don't look unreasonable , but I don't tend to pay too much attention to broker forecasts on smaller companies in the early stage of their development. Revenues and profits at this stage are very difficult to predict. With this company there are a number of other key indicators that are far more important to me in holding shares in the company for the long term.
Highlighting the significant detail from the interims:-
"Trakm8 has continued to consolidate its trading position and profitability, in addition to enhancing its robust financial position. We were very pleased to have completed the transformational acquisition of BOX Telematics just after the half year end, significantly improving our market leading position. "
"The rate at which new orders have been received during the period indicates that the expansion of our engineering and sales teams is starting to positively impact the results."
"There has been a continuing increase of 15% in the annualised recurring revenues, which are based on increased numbers of units reporting to Trakm8 servers. These revenues are the bedrock of the Group's financial future."
"Gross profit margins have continued to improve, which we anticipate to increase further once BOX Telematics is fully integrated into the Group."
It should be noted that the increase in revenues and profitability were achieved without a large order from one single customer which they had achieved in previous years. This is down to the fact that they have managed to broaden their customer base both in the UK and internationally. It's always important to me that a company does not have too heavy a reliance on one single customer. I watched a company called UBC Media (mentioned in previous blogs) for many years before buying shares in the company. Amongst the early reasons for holding off any purchase was their reliance on the BBC for the vast majority of their revenues.
"Our customer facing web based solutions are market leading........ The order pipeline has been building strongly following the appointment of a Corporate Sales Director early in 2013."
"Trakm8 has been building from the strategy announced last year to invest in more engineering and sales resources. Although, as expected, operating costs have increased at the expense of short term profitability, the new product introductions and the order pipeline is giving confidence that this investment will pay off."
Despite this investment Trakm8 continues to trade profitably.
The report regarding the early integration of BOX Telematics into the group reads very positively indeed and will be transformational for the group if they achieve the financial and strategic benefits they have outlined.
Finally,
"The Group has a much stronger pipeline of new sales opportunities than at any time in its history and has the recently enhanced engineering resource to capitalise on them."
and
"The Board believes that the investment in resources and the acquisition was timely both in terms of the improving general economic climate and the tipping point in mass market adoption of telematics that appears to have been reached. "
In conclusion, Trakm8 is a small company valued at less than £10m that could have a very big future.
I am excited about the prospects for the enlarged group which can grow significantly from a sound financial footing with high gross margins, strong cash flow and double digit growth in recurring revenues.
In other news, Angle continues to show considerable promise and is presently delivering on the timeline set out for the marketing and sales of it's Parsortix system in the diagnosis and treatment of cancer patients. This week they announced the CE Mark authorisation of its Parsortix cell separation system for use as an in vitro diagnostic device in the European Union. FDA approval should follow in due course which opens up a potential £8 billion plus market for sales of the device.
Some time ago there were rumours in the Times newspaper that Angle was a bid target. I expected that there was some substance to these rumours, and that a bid would duly follow. I still believe that because (as mentioned last week) the company is now a one product outfit with some not inconsiderable challenges to be overcome in getting the product into mass market use, a bid for the company is very much a real possibility. Of course other options are open to them, as outlined in their RNS. Overall, I am very happy to hold on tightly and see what happens in the ensuing months.
No further details from Avesco or UBC Media yet. In the meantime, I have noted that Creative Technology continue to ramp up their visibility on the website. The latest news item details their involvement in Jessie J's concerts. Certainly worth a read for shareholders:-
http://www.ct-group.com/news/ct-alive-jessie-j
As ever, no advice is intended or given.
The headline figures show that revenues increased by 10% to £2.564m, combined UK and International orders received increased by 28%, and underlying annualised recurring revenues increased by 15% to GBP2.3m. The company continues to maintain profitable growth with an operating profit before exceptional costs of £87,000, gross margins increasing slightly to 75% whilst they retained strong cash balances.
The figures are very healthy and encouraging, but it is the forward looking statements that have greater significance following the "transformational acquisition of BOX Telematics Ltd completed in October 2013". In the year ended 31 December 2012, BOX recorded revenues of GBP8.4 million and profit before tax of GBP850,000.
In the forward looking statement John Watkins, Executive Chairman of Trakm8 said:
"We expect to deliver on the investments in resources over the next year and to deliver strong growth in profitability on the back of the much larger Group revenues, in line with our expectations."
Broker forecasts are for revenues of £10.9m in 2014 with EPS of 2.3p and £16.9m in 2015 with EPS of 4p. This gives forward P/E figures of 15 and 8.5 respectively. The figures don't look unreasonable , but I don't tend to pay too much attention to broker forecasts on smaller companies in the early stage of their development. Revenues and profits at this stage are very difficult to predict. With this company there are a number of other key indicators that are far more important to me in holding shares in the company for the long term.
Highlighting the significant detail from the interims:-
"Trakm8 has continued to consolidate its trading position and profitability, in addition to enhancing its robust financial position. We were very pleased to have completed the transformational acquisition of BOX Telematics just after the half year end, significantly improving our market leading position. "
"The rate at which new orders have been received during the period indicates that the expansion of our engineering and sales teams is starting to positively impact the results."
"There has been a continuing increase of 15% in the annualised recurring revenues, which are based on increased numbers of units reporting to Trakm8 servers. These revenues are the bedrock of the Group's financial future."
"Gross profit margins have continued to improve, which we anticipate to increase further once BOX Telematics is fully integrated into the Group."
It should be noted that the increase in revenues and profitability were achieved without a large order from one single customer which they had achieved in previous years. This is down to the fact that they have managed to broaden their customer base both in the UK and internationally. It's always important to me that a company does not have too heavy a reliance on one single customer. I watched a company called UBC Media (mentioned in previous blogs) for many years before buying shares in the company. Amongst the early reasons for holding off any purchase was their reliance on the BBC for the vast majority of their revenues.
"Our customer facing web based solutions are market leading........ The order pipeline has been building strongly following the appointment of a Corporate Sales Director early in 2013."
"Trakm8 has been building from the strategy announced last year to invest in more engineering and sales resources. Although, as expected, operating costs have increased at the expense of short term profitability, the new product introductions and the order pipeline is giving confidence that this investment will pay off."
Despite this investment Trakm8 continues to trade profitably.
The report regarding the early integration of BOX Telematics into the group reads very positively indeed and will be transformational for the group if they achieve the financial and strategic benefits they have outlined.
Finally,
"The Group has a much stronger pipeline of new sales opportunities than at any time in its history and has the recently enhanced engineering resource to capitalise on them."
and
"The Board believes that the investment in resources and the acquisition was timely both in terms of the improving general economic climate and the tipping point in mass market adoption of telematics that appears to have been reached. "
In conclusion, Trakm8 is a small company valued at less than £10m that could have a very big future.
I am excited about the prospects for the enlarged group which can grow significantly from a sound financial footing with high gross margins, strong cash flow and double digit growth in recurring revenues.
In other news, Angle continues to show considerable promise and is presently delivering on the timeline set out for the marketing and sales of it's Parsortix system in the diagnosis and treatment of cancer patients. This week they announced the CE Mark authorisation of its Parsortix cell separation system for use as an in vitro diagnostic device in the European Union. FDA approval should follow in due course which opens up a potential £8 billion plus market for sales of the device.
Some time ago there were rumours in the Times newspaper that Angle was a bid target. I expected that there was some substance to these rumours, and that a bid would duly follow. I still believe that because (as mentioned last week) the company is now a one product outfit with some not inconsiderable challenges to be overcome in getting the product into mass market use, a bid for the company is very much a real possibility. Of course other options are open to them, as outlined in their RNS. Overall, I am very happy to hold on tightly and see what happens in the ensuing months.
No further details from Avesco or UBC Media yet. In the meantime, I have noted that Creative Technology continue to ramp up their visibility on the website. The latest news item details their involvement in Jessie J's concerts. Certainly worth a read for shareholders:-
http://www.ct-group.com/news/ct-alive-jessie-j
As ever, no advice is intended or given.
Sunday 15 December 2013
Angle, UBC Media, Avesco and Trakm8
Apologies to regular readers of my blog, but life is very hectic at the moment, and consequently writing my blog is not top of my priority list. However, the next couple of weeks should prove a very interesting time for four of the companies in my portfolio.
Firstly, I have written several times about my speculative investment in Angle which has done considerably well this year, and was my entry into the 2013 shares likely to gain 100% or more (a challenge on one of ADVFN's bulletin boards). Well it's done better than that. The shares were languishing in the high 20's in January, but now stand at around the 80p mark.
As previously mentioned this is essentially a speculative investment based on the company achieving success with its Parsortix device, and certainly the company appears to be delivering on it's promises. I have high hopes for this product, and if it can gain traction in it's potential markets in the near future (subject to the relevant regulatory approvals anticipated this year) then growth could be spectacular.
Friday brought excellent news with the sale of their stake in Geometrics, a graphics technology developer, to ARM holdings. The sale brings in £6.2m to Angle and effectively erases any need for funding in the near future, and refocuses the group as a specialist medtech company. The available additional financial resources will be used for its Parsortix non-invasive cancer diagnostics business.
The shares rose modestly on Friday, but I expect this is largely due to investors being unaware of the significance of this event. It would be fantastic if Angle could now go it alone and successfully bring this product to market. This would be the most lucrative option for investors, although clearly the most risky since there are always potential banana skins at such an early stage - not least capturing market share before serious competition arrives on the scene. Earlier bid rumours appear to have quietened down in recent weeks, but Angle is now essentially a one product company (albeit with enormous potential) and I fully expect that suitors for the company will emerge in the not too distant future.
Angle's sale of Geometrics brings me on to UBC Media.
I must confess that I hadn't looked at the Geometrics balance sheet, but I believe revenues were in the hundreds of thousands rather than millions. Arm appear to have paid £20m for Geometrics (I believe Angle held a 31% stake) which is a pretty hefty price, but indicative of the heady prices that can be paid for small companies with the right technology at the right time.
Tomorrow should bring news of developments in UBC's reverse takeover of 7digital. There is no guarantee that the two companies will have come to any agreement at all, but if they have then this could add further excitement to what I believe was an already potentially interesting story.
At the same time that UBC announced their proposed acquisition, they also released their interim results which were very encouraging. Not least the explosive growth of the social media site Audioboo.
From the interims :- "During the last 12 months the growth in traffic at Audioboo has been particularly impressive, with registered users more than tripling from 600,000 to 1.9 million. The level of consumption of audio on the platform has also increased: 12 months ago, the number of audio clips listened to in October was 4 million, this year in the equivalent month it was 22 million. Perhaps more significantly, the company has now implemented the technology to monetise this listening; content owners can opt to be part of an advertising network on Audioboo with pre-roll and display advertising associated with their clips. Revenues are shared between the content owners and Audioboo."
Interestingly, in the weekend FT their was an article about Beyoncé releasing her latest album in digital format only and relying on social media sites to alert her fan base. This appears to have worked extremely well, and clearly emphasises the prominence that social media will have in the future.
We will see what tomorrow brings, but potential synergies between UBC Media, 7Digital and Audioboo sound very exciting to me. Of course the devil will be in the detail of the acquisition, but I'd hope with Imagination Technologies being a large shareholder in both companies, the deal should be a fair one for all parties concerned, if indeed it goes ahead.
The next two weeks should also bring news of the return of cash (£1.10 per share) to shareholders in Avesco, and more details of the potential transaction (again if this has been agreed?). The more I've thought about it, the more I'm convinced that this is more likely to be a sale of assets rather than a purchase. Surely, if it was an acquisition then there would have been no need to delay the details of the return of cash? However if they are selling the company (or part of the company) then of course it makes sense since the sale price is inextricably linked to the share price post distribution of the funds i.e. they would need to detail NTAV etc. post shareholder payout to fully explain an agreed sale price. Of course I might be wrong, but we shouldn't have to wait too long for news.
Finally, I expect Trakm8 to release their interim results this month (they are usually released in November or December). Of course these won't include figures for the enlarged group, but they will give an indication of how well Trakm8's market's and market share are developing and they should give some indication of how the acquisition of BOX is bedding in, and what current trading is like for the enlarged group.
As ever, no advice is intended or given.
Firstly, I have written several times about my speculative investment in Angle which has done considerably well this year, and was my entry into the 2013 shares likely to gain 100% or more (a challenge on one of ADVFN's bulletin boards). Well it's done better than that. The shares were languishing in the high 20's in January, but now stand at around the 80p mark.
As previously mentioned this is essentially a speculative investment based on the company achieving success with its Parsortix device, and certainly the company appears to be delivering on it's promises. I have high hopes for this product, and if it can gain traction in it's potential markets in the near future (subject to the relevant regulatory approvals anticipated this year) then growth could be spectacular.
Friday brought excellent news with the sale of their stake in Geometrics, a graphics technology developer, to ARM holdings. The sale brings in £6.2m to Angle and effectively erases any need for funding in the near future, and refocuses the group as a specialist medtech company. The available additional financial resources will be used for its Parsortix non-invasive cancer diagnostics business.
The shares rose modestly on Friday, but I expect this is largely due to investors being unaware of the significance of this event. It would be fantastic if Angle could now go it alone and successfully bring this product to market. This would be the most lucrative option for investors, although clearly the most risky since there are always potential banana skins at such an early stage - not least capturing market share before serious competition arrives on the scene. Earlier bid rumours appear to have quietened down in recent weeks, but Angle is now essentially a one product company (albeit with enormous potential) and I fully expect that suitors for the company will emerge in the not too distant future.
Angle's sale of Geometrics brings me on to UBC Media.
I must confess that I hadn't looked at the Geometrics balance sheet, but I believe revenues were in the hundreds of thousands rather than millions. Arm appear to have paid £20m for Geometrics (I believe Angle held a 31% stake) which is a pretty hefty price, but indicative of the heady prices that can be paid for small companies with the right technology at the right time.
Tomorrow should bring news of developments in UBC's reverse takeover of 7digital. There is no guarantee that the two companies will have come to any agreement at all, but if they have then this could add further excitement to what I believe was an already potentially interesting story.
At the same time that UBC announced their proposed acquisition, they also released their interim results which were very encouraging. Not least the explosive growth of the social media site Audioboo.
From the interims :- "During the last 12 months the growth in traffic at Audioboo has been particularly impressive, with registered users more than tripling from 600,000 to 1.9 million. The level of consumption of audio on the platform has also increased: 12 months ago, the number of audio clips listened to in October was 4 million, this year in the equivalent month it was 22 million. Perhaps more significantly, the company has now implemented the technology to monetise this listening; content owners can opt to be part of an advertising network on Audioboo with pre-roll and display advertising associated with their clips. Revenues are shared between the content owners and Audioboo."
Interestingly, in the weekend FT their was an article about Beyoncé releasing her latest album in digital format only and relying on social media sites to alert her fan base. This appears to have worked extremely well, and clearly emphasises the prominence that social media will have in the future.
We will see what tomorrow brings, but potential synergies between UBC Media, 7Digital and Audioboo sound very exciting to me. Of course the devil will be in the detail of the acquisition, but I'd hope with Imagination Technologies being a large shareholder in both companies, the deal should be a fair one for all parties concerned, if indeed it goes ahead.
The next two weeks should also bring news of the return of cash (£1.10 per share) to shareholders in Avesco, and more details of the potential transaction (again if this has been agreed?). The more I've thought about it, the more I'm convinced that this is more likely to be a sale of assets rather than a purchase. Surely, if it was an acquisition then there would have been no need to delay the details of the return of cash? However if they are selling the company (or part of the company) then of course it makes sense since the sale price is inextricably linked to the share price post distribution of the funds i.e. they would need to detail NTAV etc. post shareholder payout to fully explain an agreed sale price. Of course I might be wrong, but we shouldn't have to wait too long for news.
Finally, I expect Trakm8 to release their interim results this month (they are usually released in November or December). Of course these won't include figures for the enlarged group, but they will give an indication of how well Trakm8's market's and market share are developing and they should give some indication of how the acquisition of BOX is bedding in, and what current trading is like for the enlarged group.
As ever, no advice is intended or given.
Sunday 3 November 2013
Synety - A very promising speculative stock?
Synety, a UK software and telco company specialising in the provision of cloud based telephone call-control systems looks a very interesting speculative investment, and relatively recently I added this company to my current portfolio of shares, although I might add that it was a fairly modest purchase.
On many levels the company doesn't meet my usual criteria, not least because at the interim stage of this year the company made an operating loss of £1.3m and revenues were just shy of £200,000. At first glance, not exactly mouth watering I'll admit.
So why did I buy shares in this outfit? Well firstly, on the day of the interim results, I noticed that they had also raised £2.1m in a placing with institutional investors for the following reasons:-
"The net proceeds of the Placing will be used to expand the Company's UK sales force and customer services
team, expand and strengthen the technology platform with disaster recovery features and provide general working capital for the Company to capitalise on its first-mover advantage and land grab a market niche where the Directors believe there is limited competition and significant potential."
The placing was at 150p per share, and the sentence highlighted in bold and subsequent developments enticed me to invest at about these same levels.
The trading update in September was very encouraging where they said that there had been a 30% increase in recurring revenue in 2 months, and growth is expected to continue at a faster pace.
Simon Cleaver the Executive Chairman said, "In the 6 months since we provided a trading update at the time of the Company's 2012 preliminary results statement, we have begun to see a much clearer, and very exciting picture emerging of market demand and potential for CloudCall."
The key performance indicators in the two months from June 2013 to August 2013 do look very impressive indeed, and annualised recurring revenue is now running at close to £500,000.
Cleaver finishes the update with the following:-
"There is every indication, as I have reported before, that we have a product offering that is capable of extensive rollout. Consequently, we have considerable confidence in both the short and longer term prospects for the Company."
To back up his confidence in the company, Cleaver and two other Directors have been recent buyers of the shares.
The company appears to have hit a very rich vein of growth, and if they are successful with their "land grab" opportunity then this could be a stellar performer.
With a market cap. of just £11m, whilst it doesn't look immediately cheap on fundamentals, in the context of it's growth potential and when compared to the valuations of many "trendy" tech companies at the moment, the current share price of 180p may well prove to be somewhat of a snip. We shall see.
As ever, no advice intended or given.
On many levels the company doesn't meet my usual criteria, not least because at the interim stage of this year the company made an operating loss of £1.3m and revenues were just shy of £200,000. At first glance, not exactly mouth watering I'll admit.
So why did I buy shares in this outfit? Well firstly, on the day of the interim results, I noticed that they had also raised £2.1m in a placing with institutional investors for the following reasons:-
"The net proceeds of the Placing will be used to expand the Company's UK sales force and customer services
team, expand and strengthen the technology platform with disaster recovery features and provide general working capital for the Company to capitalise on its first-mover advantage and land grab a market niche where the Directors believe there is limited competition and significant potential."The placing was at 150p per share, and the sentence highlighted in bold and subsequent developments enticed me to invest at about these same levels.
The trading update in September was very encouraging where they said that there had been a 30% increase in recurring revenue in 2 months, and growth is expected to continue at a faster pace.
Simon Cleaver the Executive Chairman said, "In the 6 months since we provided a trading update at the time of the Company's 2012 preliminary results statement, we have begun to see a much clearer, and very exciting picture emerging of market demand and potential for CloudCall."
The key performance indicators in the two months from June 2013 to August 2013 do look very impressive indeed, and annualised recurring revenue is now running at close to £500,000.
Cleaver finishes the update with the following:-
"There is every indication, as I have reported before, that we have a product offering that is capable of extensive rollout. Consequently, we have considerable confidence in both the short and longer term prospects for the Company."
To back up his confidence in the company, Cleaver and two other Directors have been recent buyers of the shares.
The company appears to have hit a very rich vein of growth, and if they are successful with their "land grab" opportunity then this could be a stellar performer.
With a market cap. of just £11m, whilst it doesn't look immediately cheap on fundamentals, in the context of it's growth potential and when compared to the valuations of many "trendy" tech companies at the moment, the current share price of 180p may well prove to be somewhat of a snip. We shall see.
As ever, no advice intended or given.
Saturday 2 November 2013
Ultrasis - Beating the blues?
Ultrasis, a provider of interactive health care services, also features in this weekend's FT. Investors who bought shares early this year when the share price hovered just above 0.2p will be sitting on very healthy paper profits indeed.
http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1
It's not a company I'm familiar with, and a quick look through it's financials doesn't inspire me to buy shares in the company. From what I can see revenues and profits have steadily fallen over the past five years, and indeed the company was loss making in 2011 and 2012.
Whilst they have recently won a new, possibly lucrative contract, the financial details of the contract have not been disclosed.
Losses at the interim stage of 2013 have continued and the balance sheet doesn't look very strong.
What would also concern me is that they appear to have just acquired a £0.5m revenue company with a pre-tax profit of just £91,000 for nearly £5m. Ultrasis itself is currently valued at £18.5m.
I might be missing something here, and "Beating the Blues" might be a massive booster to revenue and earnings in the future, but with revenue of just £480,000 at the interim stage, there's an awful lot of expectation already priced in.
As ever, no advice intended or given.
http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1
It's not a company I'm familiar with, and a quick look through it's financials doesn't inspire me to buy shares in the company. From what I can see revenues and profits have steadily fallen over the past five years, and indeed the company was loss making in 2011 and 2012.
Whilst they have recently won a new, possibly lucrative contract, the financial details of the contract have not been disclosed.
Losses at the interim stage of 2013 have continued and the balance sheet doesn't look very strong.
What would also concern me is that they appear to have just acquired a £0.5m revenue company with a pre-tax profit of just £91,000 for nearly £5m. Ultrasis itself is currently valued at £18.5m.
I might be missing something here, and "Beating the Blues" might be a massive booster to revenue and earnings in the future, but with revenue of just £480,000 at the interim stage, there's an awful lot of expectation already priced in.
As ever, no advice intended or given.
Netplay - worth a flutter?
Netplay, an interactive gaming company looks interesting. This week's FT features a small article regarding it's recent acquisition of Vernon's.
http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1
Netplay used to feature on my monitor, but it's not one that I followed very closely and I don't own any shares.
However, I've just cast my eyes over the company again, and it does appear to have been progressing well, and certainly has potential.
The shares have fallen below 5p in the not too distant past (2011) and in fact traded just below 12p as recently as early this year, I suspect that they may have much further to run though with a medium/long term view.
Broker forecasts are for 1.53p in the year ending Dec 2013 and 1.83p in 2014 giving forward EPS of 14 and 12 respectively. However, I would expect these to be upgraded given that the Vernons acquisition is immediately earnings enhancing. A recent trading statement (pre Vernons) confirmed that trading continued to be strong and that they were confident of meeting market expectations.
What I like about this company is that it is strongly cash generative and appears to be growing at a very healthy rate, and as far as I can see it doesn't have any debt. In fact it currently boasts £15m in cash on it's balance sheet which is nearly a quarter of its current market cap.
The strong cash generation will enable the company to continue with a progressive dividend policy whilst at the same time pick up strategic acquisitions to help further it's growth.
It appears to a be a company that doesn't immediately look cheap, but on closer inspection and with continued growth momentum, it may well prove to be a very profitable medium to long term prospect.
As ever, no advice intended or given.
http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1
Netplay used to feature on my monitor, but it's not one that I followed very closely and I don't own any shares.
However, I've just cast my eyes over the company again, and it does appear to have been progressing well, and certainly has potential.
The shares have fallen below 5p in the not too distant past (2011) and in fact traded just below 12p as recently as early this year, I suspect that they may have much further to run though with a medium/long term view.
Broker forecasts are for 1.53p in the year ending Dec 2013 and 1.83p in 2014 giving forward EPS of 14 and 12 respectively. However, I would expect these to be upgraded given that the Vernons acquisition is immediately earnings enhancing. A recent trading statement (pre Vernons) confirmed that trading continued to be strong and that they were confident of meeting market expectations.
What I like about this company is that it is strongly cash generative and appears to be growing at a very healthy rate, and as far as I can see it doesn't have any debt. In fact it currently boasts £15m in cash on it's balance sheet which is nearly a quarter of its current market cap.
The strong cash generation will enable the company to continue with a progressive dividend policy whilst at the same time pick up strategic acquisitions to help further it's growth.
It appears to a be a company that doesn't immediately look cheap, but on closer inspection and with continued growth momentum, it may well prove to be a very profitable medium to long term prospect.
As ever, no advice intended or given.
Friday 1 November 2013
Bid rumours and Director purchases - Angle and Regenersis
Note to self. Never try and predict what might happen with company share prices from one week to the next. One of my recent blogs entitled "Angle - next week's biggest riser?" has turned out to be a bit of a damp squib.
http://michae1mouse.blogspot.co.uk/2013/10/angle-next-weeks-biggest-riser.html
Whilst I didn't attend yesterday's AGM, bulletin board posters that did attend have reported that the Directors have scotched rumours of any imminent MBO or bid approach. However, progress does appear to be on track with their Parsortix device which could hopefully propel the company into a multi-million pound market cap. in the medium to long term. Fingers crossed, excepting that this is a speculative investment.
I'll refrain from further comment on the Times bid speculation because ultimately I would be extremely pleased if Angle can successfully go it alone. Certainly it would be more lucrative for shareholders in the longer term.
However, before I leave the bid rumour topic alone completely, I'll just say this. In April this year, Verizon Wireless denied any interest in making a joint bid for Vodafone with AT&T, despite press rumours. In essence they were right to deny the rumours, but of course whilst the press didn't get it quite right, in less than a year Vodafone's stake in Verizon has been spun out of the company and back to Verizon and now AT&T are purportedly exploring a possible bid over the rest of Vodafone.
No smoke without fire? Who knows? Anyway, I'll move on. Needless to say I still hold all my shares in Angle.
I found this morning's post by paulypilot a very interesting read where he relates his experience of using too much gearing. A sobering read which is refreshingly honest.
http://www.stockopedia.com/content/small-cap-value-report-1-nov-puri-esch-78727/
As I've mentioned I never use spread bets, but if I had ever entertained the thought then Paul's article would certainly put me off.
He also makes a good point about Director's buying and selling shares in their own companies. I wrote a blog describing my thoughts on this topic in 2011:-
http://michae1mouse.blogspot.co.uk/2011/03/put-your-money-where-your-mouth-is.html
A company where Director's have consistently been purchasing shares in recent months is Regenersis. I have looked at the company several times , but haven't bought the shares. Firstly I prefer to buy very small and micro-cap companies (although not always), but secondly I favour a balance sheet backed by tangible assets. Whilst Regenersis has £39m in net assets, there is £40m of goodwill on the balance sheet.
However, the Directors are clearly bullish and they appear to have good reason to be. From their recent report to end of June 2013, operating profit more than doubled to GBP7.1 million (2012: GBP2.1 million), and operating cash flow more than doubled to GBP9.9 million (2012: GBP4.9 million). Adjusted EPS increased by 21% to 16.80p (2012: 13.85p) and basic EPS increased by 216% to 10.53p (2012: 3.33p).
The short, medium and long term outlook statement is very bullish,
"In June 2011, we set out a strategy to target double digit rates of growth in revenue and profits for the following 2-3 years. We have achieved that. Having invested well, we now believe the opportunity exists to continue to grow annually at double digit rates of growth for the foreseeable future."
Last year the dividend was increased 127% to 2.5p (1.1p in 2012).
The historic p/e ratio (2013) is around 25 and the dividend yield about 1%.
Broker forecasts for 2014 come in at 18.37p (although this is adjusted EPS) giving a forward P/E of 14.
Overall, it's probably fairly valued at this price in my opinion, but it may be of interest for some should the share price take a dip.
As ever, no advice intended or given.
http://michae1mouse.blogspot.co.uk/2013/10/angle-next-weeks-biggest-riser.html
Whilst I didn't attend yesterday's AGM, bulletin board posters that did attend have reported that the Directors have scotched rumours of any imminent MBO or bid approach. However, progress does appear to be on track with their Parsortix device which could hopefully propel the company into a multi-million pound market cap. in the medium to long term. Fingers crossed, excepting that this is a speculative investment.
I'll refrain from further comment on the Times bid speculation because ultimately I would be extremely pleased if Angle can successfully go it alone. Certainly it would be more lucrative for shareholders in the longer term.
However, before I leave the bid rumour topic alone completely, I'll just say this. In April this year, Verizon Wireless denied any interest in making a joint bid for Vodafone with AT&T, despite press rumours. In essence they were right to deny the rumours, but of course whilst the press didn't get it quite right, in less than a year Vodafone's stake in Verizon has been spun out of the company and back to Verizon and now AT&T are purportedly exploring a possible bid over the rest of Vodafone.
No smoke without fire? Who knows? Anyway, I'll move on. Needless to say I still hold all my shares in Angle.
I found this morning's post by paulypilot a very interesting read where he relates his experience of using too much gearing. A sobering read which is refreshingly honest.
http://www.stockopedia.com/content/small-cap-value-report-1-nov-puri-esch-78727/
As I've mentioned I never use spread bets, but if I had ever entertained the thought then Paul's article would certainly put me off.
He also makes a good point about Director's buying and selling shares in their own companies. I wrote a blog describing my thoughts on this topic in 2011:-
http://michae1mouse.blogspot.co.uk/2011/03/put-your-money-where-your-mouth-is.html
A company where Director's have consistently been purchasing shares in recent months is Regenersis. I have looked at the company several times , but haven't bought the shares. Firstly I prefer to buy very small and micro-cap companies (although not always), but secondly I favour a balance sheet backed by tangible assets. Whilst Regenersis has £39m in net assets, there is £40m of goodwill on the balance sheet.
However, the Directors are clearly bullish and they appear to have good reason to be. From their recent report to end of June 2013, operating profit more than doubled to GBP7.1 million (2012: GBP2.1 million), and operating cash flow more than doubled to GBP9.9 million (2012: GBP4.9 million). Adjusted EPS increased by 21% to 16.80p (2012: 13.85p) and basic EPS increased by 216% to 10.53p (2012: 3.33p).
The short, medium and long term outlook statement is very bullish,
"In June 2011, we set out a strategy to target double digit rates of growth in revenue and profits for the following 2-3 years. We have achieved that. Having invested well, we now believe the opportunity exists to continue to grow annually at double digit rates of growth for the foreseeable future."
Last year the dividend was increased 127% to 2.5p (1.1p in 2012).
The historic p/e ratio (2013) is around 25 and the dividend yield about 1%.
Broker forecasts for 2014 come in at 18.37p (although this is adjusted EPS) giving a forward P/E of 14.
Overall, it's probably fairly valued at this price in my opinion, but it may be of interest for some should the share price take a dip.
As ever, no advice intended or given.
Thursday 31 October 2013
No news from Angle yet - AGM 2pm today
It's probably just as well that I never use spread bets (as mentioned in my last blog re:Angle). I was anticipating bid news from the company this week, and a sharp rise in the share price. At the very least I thought that a trading update may materialise today. The AGM is scheduled for 2pm. As yet the company have issued nothing, although the day is young!
I suspect that the company may make a bland "we don't comment on market rumours" statement at the AGM if questioned, but it does seem odd that they haven't made an outright rebuttal since it's a very small company and bid rumours aren't normally a daily occurrence for these small caps. Why not just state outright that "the company is aware of the persistent rumours printed in the Times, but can categorically deny that the company is not currently in bid talks". It's not that difficult surely. This isn't Vodafone where rumours of a sale of Verizon Wireless cropped up quite regularly. Although of course they did prove to be well founded in the end.
It will be interesting to see if the days events do shed any light on either bid interest or further developments re: Parsortix.
I certainly haven't changed my view about the bid rumours though, until I hear a flat denial by the company I continue to believe it may just be a matter of time.
Needless to say, I remain a long term holder, and await further developments.
I suspect that the company may make a bland "we don't comment on market rumours" statement at the AGM if questioned, but it does seem odd that they haven't made an outright rebuttal since it's a very small company and bid rumours aren't normally a daily occurrence for these small caps. Why not just state outright that "the company is aware of the persistent rumours printed in the Times, but can categorically deny that the company is not currently in bid talks". It's not that difficult surely. This isn't Vodafone where rumours of a sale of Verizon Wireless cropped up quite regularly. Although of course they did prove to be well founded in the end.
It will be interesting to see if the days events do shed any light on either bid interest or further developments re: Parsortix.
I certainly haven't changed my view about the bid rumours though, until I hear a flat denial by the company I continue to believe it may just be a matter of time.
Needless to say, I remain a long term holder, and await further developments.
Wednesday 30 October 2013
Servoca - 40% rise today
Servoca Plc describes itself as a leading provider of specialist recruitment solutions to the Education, Healthcare and Criminal Justice sectors. Its Security division offers security services to the public and private sectors.
Today (30th Oct.) it released a trading statement saying, "The Company is pleased to report that results for the year ended 30 September 2013 will be significantly ahead of market expectations and the Board is encouraged by the continued performance of the Group." It goes on to say that, "The September period, which is important for the Group's Education recruitment businesses
, was positive and a marked improvement on the prior year. Trading in the second half and the platform established from our Education activities give the Board confidence on further growth in 2014."
A very positive statement indeed, and as a consequence the shares have risen 40% today in response, valuing the group at £8.2m.
Forecasts for this year came in at 0.3p on revenue of £45m. Looking at performance in 2009 diluted EPS came in at 2.78p. Clearly if they can return to those levels on the back of an improving economy then even after the substantial rise today the shares might look cheap.
The shares have traded as high as 48p/49p, but not for some considerable time. Net assets come in at just over £7m (mostly intangibles). The company has clearly been well under the radar of private investors and needless to say professionals, but it might be an interesting punt for some.
I don't own shares in Servoca, and it doesn't fit my selection criteria, however if economic recovery does take a stronger hold in the next year or two then I'm sure the share price has far farther to climb.
As ever, no advice intended or given.
Today (30th Oct.) it released a trading statement saying, "The Company is pleased to report that results for the year ended 30 September 2013 will be significantly ahead of market expectations and the Board is encouraged by the continued performance of the Group." It goes on to say that, "The September period, which is important for the Group's Education recruitment businesses
, was positive and a marked improvement on the prior year. Trading in the second half and the platform established from our Education activities give the Board confidence on further growth in 2014."A very positive statement indeed, and as a consequence the shares have risen 40% today in response, valuing the group at £8.2m.
Forecasts for this year came in at 0.3p on revenue of £45m. Looking at performance in 2009 diluted EPS came in at 2.78p. Clearly if they can return to those levels on the back of an improving economy then even after the substantial rise today the shares might look cheap.
The shares have traded as high as 48p/49p, but not for some considerable time. Net assets come in at just over £7m (mostly intangibles). The company has clearly been well under the radar of private investors and needless to say professionals, but it might be an interesting punt for some.
I don't own shares in Servoca, and it doesn't fit my selection criteria, however if economic recovery does take a stronger hold in the next year or two then I'm sure the share price has far farther to climb.
As ever, no advice intended or given.
Monday 28 October 2013
An irrational fear of picking dogs
Over the weekend I wrote an article about the current bull run in the UK stock market and shared my personal thoughts regarding its likely duration. In truth, guessing the direction of stock markets is a bit of a mugs game. Not dissimilar to predicting the weather.
Whilst I am sure much of the UK has suffered from the much hyped storm this morning and last night, where I live it's a nice sunny day with a light breeze. Of course it's possible that the storm is currently making it's way towards us, but I won't hold my breath. Interestingly, although forecasters are rarely able to accurately predict even a few days in advance, it never seems to deter them from predicting the outcome for a year or even further out. It wasn't so long ago that climate change experts were predicting that Britain would soon have a climate akin to the South of France and that mild winters would prevail for years to come. Well this summer wasn't too bad, but if the past three winters have been mild then I'm not looking forward to a severe one.
Anyway, I digress.
In the article I wrote over the weekend, I mentioned again that the Financial crisis and subsequent recession had provided the investing opportunity of a lifetime, a view I expressed at the time.
I noticed today that Pendragon released a trading statement. It's a good statement which says that profitability for this year is materially above expectations, and that they are cautiously optimistic about 2014. The shares are currently around 40p.
Of course during the height of the panic, unbelievably the shares were driven down to 1.5p. A £1000 investment at that point would now be worth around £26,600.
This brings me to a more general point about investment strategies. It appears to me that many investors are too fearful and cautious about individual losses whilst ignoring the possible exponential gains from buying a small basketful of such shares.
Consider buying shares in ten companies that looked like basket cases at the height of the crisis when they were at or close to their nadirs. Let's imagine you bought PDG, JSG, HRG, TCG and AVS(a share I currently hold). A £1000 investment in each when they were at or close to their lows would now be worth £26,600, £11,000, £16,000, £10,000 and £11,000 respectively (please note that I haven't checked the exact lows, but I am quite sure that the figures are pretty accurate from memory). That's a whopping £75,600 from a £10,000 investment. Let's assume that the other five picks went bust and you lost £5,000. In reality, with reasonable stock picking ability and common sense, you are unlikely to pick five companies that go to the wall.
In fact it appears to me that many investors are totally irrational regarding risk.
Put simply, imagine tossing a coin 10 times, and it's £1000 per go, Heads you win £5000 and tails you lose your £1000 stake. You only need to win twice to break even. Nobody in their right minds would offer you such good odds where the chance of winning is 50%. If you have proven yourself to be a reasonably good stock picker then of course your chances are undoubtedly greater than 50%.
Psychologically it's difficult to take a loss, no matter how small, but actually with a small basket of such shares the fear of loss is totally irrational.
Whilst I am sure much of the UK has suffered from the much hyped storm this morning and last night, where I live it's a nice sunny day with a light breeze. Of course it's possible that the storm is currently making it's way towards us, but I won't hold my breath. Interestingly, although forecasters are rarely able to accurately predict even a few days in advance, it never seems to deter them from predicting the outcome for a year or even further out. It wasn't so long ago that climate change experts were predicting that Britain would soon have a climate akin to the South of France and that mild winters would prevail for years to come. Well this summer wasn't too bad, but if the past three winters have been mild then I'm not looking forward to a severe one.
Anyway, I digress.
In the article I wrote over the weekend, I mentioned again that the Financial crisis and subsequent recession had provided the investing opportunity of a lifetime, a view I expressed at the time.
I noticed today that Pendragon released a trading statement. It's a good statement which says that profitability for this year is materially above expectations, and that they are cautiously optimistic about 2014. The shares are currently around 40p.
Of course during the height of the panic, unbelievably the shares were driven down to 1.5p. A £1000 investment at that point would now be worth around £26,600.
This brings me to a more general point about investment strategies. It appears to me that many investors are too fearful and cautious about individual losses whilst ignoring the possible exponential gains from buying a small basketful of such shares.
Consider buying shares in ten companies that looked like basket cases at the height of the crisis when they were at or close to their nadirs. Let's imagine you bought PDG, JSG, HRG, TCG and AVS(a share I currently hold). A £1000 investment in each when they were at or close to their lows would now be worth £26,600, £11,000, £16,000, £10,000 and £11,000 respectively (please note that I haven't checked the exact lows, but I am quite sure that the figures are pretty accurate from memory). That's a whopping £75,600 from a £10,000 investment. Let's assume that the other five picks went bust and you lost £5,000. In reality, with reasonable stock picking ability and common sense, you are unlikely to pick five companies that go to the wall.
In fact it appears to me that many investors are totally irrational regarding risk.
Put simply, imagine tossing a coin 10 times, and it's £1000 per go, Heads you win £5000 and tails you lose your £1000 stake. You only need to win twice to break even. Nobody in their right minds would offer you such good odds where the chance of winning is 50%. If you have proven yourself to be a reasonably good stock picker then of course your chances are undoubtedly greater than 50%.
Psychologically it's difficult to take a loss, no matter how small, but actually with a small basket of such shares the fear of loss is totally irrational.
Sunday 27 October 2013
Access Intelligence
Access Intelligence Plc (AIM: ACC) is a leading supplier of Software-as-a-Service (SaaS) solutions for the full life cycle management of a company's governance, risk and compliance. They issued a profit warning at the end of September stating that current trading and anticipated results for the year ending 30 November 2013 would be below expectations.
The share price dropped as a consequence, but has subsequently returned to the level it was before the announcement. The current market cap of the company is just below £7m.
Whilst profit warnings are unwelcome, I believe it's crucial to keep a perspective and consider the medium and longer term potential.
Even though trading was reported below market expectations, revenues will come in 5% above last year's at £8.4m and EBITDA is also ahead of last year. This is hardly a disaster or a company in trouble.
The company has recently made a substantial investment in a Development Centre in York on product innovation that is expected to drive growth for 2014 and beyond, and cash flows remain robust with the year-end cash expected to be approximately GBP1.2m.
Gross margins are very healthy at this company, and a high percentage of revenues are recurring.
There is a report on their website from Merchant Securities (March 2013) stating the investment case for ACC with a target price of 7p.
http://www.accessintelligence.com/downloads/07032013_accessintelligence_initiation.pdf
Hopefully, the missed expectations this year will prove to be a blip, and I can't see anything to suggest prospects for the medium and long term have materially changed. I continue to hold, and may add on any further weakness.
of a company's governance, risk and compliance. They issued a profit warning at the end of September stating that current trading and anticipated results for the year ending 30 November 2013 would be below expectations. The share price dropped as a consequence, but has subsequently returned to the level it was before the announcement. The current market cap of the company is just below £7m.
Whilst profit warnings are unwelcome, I believe it's crucial to keep a perspective and consider the medium and longer term potential.
Even though trading was reported below market expectations, revenues will come in 5% above last year's at £8.4m and EBITDA is also ahead of last year. This is hardly a disaster or a company in trouble.
The company has recently made a substantial investment in a Development Centre in York on product innovation that is expected to drive growth for 2014 and beyond, and cash flows remain robust with the year-end cash expected to be approximately GBP1.2m.
Gross margins are very healthy at this company, and a high percentage of revenues are recurring.
There is a report on their website from Merchant Securities (March 2013) stating the investment case for ACC with a target price of 7p.
http://www.accessintelligence.com/downloads/07032013_accessintelligence_initiation.pdf
Hopefully, the missed expectations this year will prove to be a blip, and I can't see anything to suggest prospects for the medium and long term have materially changed. I continue to hold, and may add on any further weakness.
Trakm8 confirms acquisition of BOX
On Friday Trakm8 held a General Meeting and confirmed the acquisition of BOX Telematics. John Watkins, CEO of Trakm8 Holdings PLC, commented:
"We are pleased to welcome the new shareholders who have helped us to complete this transformational transaction. BOX Telematics extends our client base, strengthens our IP ownership model and adds manufacturing capabilities. We look forwarded to delivering enhanced returns for our shareholders and reinforcing our position in the Telematics market."
I like this acquisition, see previous blog:-
http://michae1mouse.blogspot.co.uk/2013/10/trakm8-acquires-box-good-deal.html
With the enlarged share capital, the combined group is valued at just over £9m. I think the current share price will prove to be far too low with a short, medium and long term view. I'm a great fan of the management here who appear to take relatively modest salaries, but stump up plenty of cash to invest in their own shares. In fact to help fund the acquisition the Directors subscribed for £750,000 worth of shares to add to their already considerable holdings. In fact the shares were purchased at a premium to the prevailing price at the time. Not the first time they have done this.
A clear indication of their confidence going forward and their commitment to increasing shareholder value.
In contrast, I noted that Globo, a big favourite on the bulletin boards has also recently made an acquisition and raised a considerable sum through a placing. If the FT weekend is accurate, the Directors have sold £710,000 of shares. Surely that can't be right?
I know nothing about Globo, and haven't looked at its accounts, but I do know it has been targeted by shorters in recent days.
If Directors really have sold a big slug of shares whilst at the same time raising money through a placing then it hardly engenders confidence, and indeed plays right into the hands of the usual suspects.
Anyway, no advice intended or given.
of Trakm8 Holdings PLC, commented: "We are pleased to welcome the new
shareholders who have helped us to complete this transformational transaction. BOX Telematics extends our client base, strengthens our IP ownership model and adds manufacturing capabilities. We look forwarded to delivering enhanced returns for our shareholders and reinforcing our position in the Telematics market." I like this acquisition, see previous blog:-
http://michae1mouse.blogspot.co.uk/2013/10/trakm8-acquires-box-good-deal.html
With the enlarged share capital, the combined group is valued at just over £9m. I think the current share price will prove to be far too low with a short, medium and long term view. I'm a great fan of the management here who appear to take relatively modest salaries, but stump up plenty of cash to invest in their own shares. In fact to help fund the acquisition the Directors subscribed for £750,000 worth of shares to add to their already considerable holdings. In fact the shares were purchased at a premium to the prevailing price at the time. Not the first time they have done this.
A clear indication of their confidence going forward and their commitment to increasing shareholder value.
In contrast, I noted that Globo, a big favourite on the bulletin boards has also recently made an acquisition and raised a considerable sum through a placing. If the FT weekend is accurate, the Directors have sold £710,000 of shares. Surely that can't be right?
I know nothing about Globo, and haven't looked at its accounts, but I do know it has been targeted by shorters in recent days.
If Directors really have sold a big slug of shares whilst at the same time raising money through a placing then it hardly engenders confidence, and indeed plays right into the hands of the usual suspects.
Anyway, no advice intended or given.
Angle - next week's biggest riser?
I've never used and probably will never use spread bets. Far too risky for me. However, if I was going to use a spread bet then I would be very tempted to take a risk on Angle's SP moving sharply upwards sometime next week. It's not the forthcoming AGM that I think will have a dramatic impact, but the persistent rumours of bid interest that have appeared in the Times. Last week was the second time that the newspaper reported rumours of takeover talk in the region of £2+ per share. In fact they specifically quoted a possible bid at £2.25. It seems inconceivable to me that there isn't any substance to these rumours, and surely it's only a matter of time before they have to come clean.
Long term investors, like me, are probably thinking along the same lines at the moment. That is to say, if anybody is willing to stump up over £2 a share for the company now, then what could it be worth in a year or two's time when the Parsortix device has CE and FDA approval and is being marketed for clinical sales? Sadly, given that the SP currently stands in the low 80s, I expect anybody bidding above £2 i.e. more than a 100% premium, is unlikely to be rebuffed by majority shareholders.
No advice is intended, but brave spread betters might fancy a punt on Angle tomorrow, although depending on what tomorrow brings, they might have already missed their opportunity. I'm not that brave and I'll stick with my long position, but it should be an interesting week.
Avesco should be in contact with shareholders in the not too distant future regarding the details of the special dividend payout (£1.10). Stripping this payment out leaves a current share price of £1.15 or fully diluted market cap. of just under £32m. This is cheap and a healthy discount to tangible net asset value. The Winter Olympics, Football World Cup and Commonwealth games should provide a very healthy boost to earnings during 2014 and, as mentioned many times in the past, this is a cash generative company where I believe dividends will probably rise to around 5p in 2014. Based on a share price of £1.15 (post Disney payout) this equates to a 4.3% dividend.
Also of interest, Avesco appear to have recently invested in new lightweight LED displays which appear to be having a major impact:-
http://www.ct-group.com/news/ct-introduces-worlds-lightest-full-resolution-led-system
"Commenting on the first shows to be completed in the US, Graham Andrews President CT North America and Asia Pacific, commented "The light weight, speed of deployment and image quality of this product has been incredible. We believe it will be a real game changer in how medium resolution LED can be applied to shows from the largest Corporate or Entertainment application to small displays in TV studios etc." "
"Dave Crump, CEO of Creative Technology in Europe and the Middle East added "getting this product to market has been a tough challenge, we have worked closely with the manufacturer to produce a hybrid version of their standard product which offers significant improvements in reliability and functionality, this has been done against some very tight deadlines. We look forward to seeing and sharing the results on some incredible projects in the coming months."
http://www.ct-group.com/news/cts-glux-carbon-10-led-system-redefines-event-environments-use
"CT and its partners already have access to over 1,000m2 of this product which we believe will have a major impact on the touring and live events industry. The ultra lightweight, speed of rigging and low operating cost mean productions with modest budgets can now incorporate spectacular moving screens. "
Long term investors, like me, are probably thinking along the same lines at the moment. That is to say, if anybody is willing to stump up over £2 a share for the company now, then what could it be worth in a year or two's time when the Parsortix device has CE and FDA approval and is being marketed for clinical sales? Sadly, given that the SP currently stands in the low 80s, I expect anybody bidding above £2 i.e. more than a 100% premium, is unlikely to be rebuffed by majority shareholders.
No advice is intended, but brave spread betters might fancy a punt on Angle tomorrow, although depending on what tomorrow brings, they might have already missed their opportunity. I'm not that brave and I'll stick with my long position, but it should be an interesting week.
Avesco should be in contact with shareholders in the not too distant future regarding the details of the special dividend payout (£1.10). Stripping this payment out leaves a current share price of £1.15 or fully diluted market cap. of just under £32m. This is cheap and a healthy discount to tangible net asset value. The Winter Olympics, Football World Cup and Commonwealth games should provide a very healthy boost to earnings during 2014 and, as mentioned many times in the past, this is a cash generative company where I believe dividends will probably rise to around 5p in 2014. Based on a share price of £1.15 (post Disney payout) this equates to a 4.3% dividend.
Also of interest, Avesco appear to have recently invested in new lightweight LED displays which appear to be having a major impact:-
http://www.ct-group.com/news/ct-introduces-worlds-lightest-full-resolution-led-system
"Commenting on the first shows to be completed in the US, Graham Andrews President CT North America and Asia Pacific, commented "The light weight, speed of deployment and image quality of this product has been incredible. We believe it will be a real game changer in how medium resolution LED can be applied to shows from the largest Corporate or Entertainment application to small displays in TV studios etc." "
"Dave Crump, CEO of Creative Technology in Europe and the Middle East added "getting this product to market has been a tough challenge, we have worked closely with the manufacturer to produce a hybrid version of their standard product which offers significant improvements in reliability and functionality, this has been done against some very tight deadlines. We look forward to seeing and sharing the results on some incredible projects in the coming months."
http://www.ct-group.com/news/cts-glux-carbon-10-led-system-redefines-event-environments-use
"CT and its partners already have access to over 1,000m2 of this product which we believe will have a major impact on the touring and live events industry. The ultra lightweight, speed of rigging and low operating cost mean productions with modest budgets can now incorporate spectacular moving screens. "
UBC Media - this week's best performer
The best performer in my portfolio this week was UBC Media, and as reported in the FT yesterday it was also the best performer on the stock market with a share price rise of 96.2%. The current market cap. of UBC is now around £12.5m and it's already been a spectacular performer for me, but I won't be selling. To listen to my reasoning click the audioboo link below:-
https://audioboo.fm/boos/1688042-ubc-media-further-investment-in-audio-boo
As ever, no advice intended or given.
https://audioboo.fm/boos/1688042-ubc-media-further-investment-in-audio-boo
As ever, no advice intended or given.
Saturday 26 October 2013
Densitron - still no good reason to re-invest
Densitron, a company that I have commented on in the past, released a statement this week concerning the settlement of a claim made against the Company by the landlords of a property in Newcastle previously occupied by a former subsidiary, Densitron Ferrograph Limited.
In the past I have held shares in Densitron, but decided to sell when this case appeared to be dragging on and trading had deteriorated. Below you can see my comments back in August:-
http://michae1mouse.blogspot.co.uk/2013/08/updates-ubc-media-densitron-ddd-group.html
"Densitron was a company in which I held shares, but I did sell in June following a poor trading statement. You can follow my reasoning in the blog below:-
http://michae1mouse.blogspot.co.uk/2013_06_01_archive.html
Following Friday's interim statement, I have no appetite to repurchase any shares in this company.
Revenues decreased by 6% whilst orders booked fell by 7% and the company reported a £315,000 loss.
Whilst the company sounds positive about the second half, has a reasonable balance sheet and is paying an interim dividend of 0.1p, I am nervous about the outstanding writ against the company. This matter has been dragging on for many months despite their attempts to resolve the matter out of court. A date has now been set for the trial on 8th December. This suggests to me that the Landlord has a very strong case, and any settlement either inside or outside of court could (imo) be very punitive for Densitron.
I'll continue to monitor the situation, and never say never, as the saying goes, but allied to recent inconsistent trading this one will remain on the monitor."
Whilst the management state that "the settlement is in the best interests of the group", no financial details have been disclosed and it appears that Densitron are still lumbered with the lease payments until an agent can find a suitable tenant.
I am guessing that the settlement is a hefty one, and then of course they will have incurred legal fees and are still liable for the rent of an unoccupied property.
In response to the news, the share price did move up a few percentage points surprisingly, but whilst Densitron's market cap. is very low, I can't see anything to get excited about and it will be interesting to see their balance sheet when they release their finals.
I really find it most odd that they state:-
"It was agreed that the details of the settlement would remain confidential but in essence the Company has agreed to a settlement amount and the rectification of the lease at the current market rent. "
Are they hoping to keep it secret forever? Will they just ignore it in their final results?
Perhaps they've forgotten that their shareholders are part owners of the company. Bizarre.
Personally, I wouldn't touch this company with a bargepole in the future following this fiasco.
In the past I have held shares in Densitron, but decided to sell when this case appeared to be dragging on and trading had deteriorated. Below you can see my comments back in August:-
http://michae1mouse.blogspot.co.uk/2013/08/updates-ubc-media-densitron-ddd-group.html
"Densitron was a company in which I held shares, but I did sell in June following a poor trading statement. You can follow my reasoning in the blog below:-
http://michae1mouse.blogspot.co.uk/2013_06_01_archive.html
Following Friday's interim statement, I have no appetite to repurchase any shares in this company.
Revenues decreased by 6% whilst orders booked fell by 7% and the company reported a £315,000 loss.
Whilst the company sounds positive about the second half, has a reasonable balance sheet and is paying an interim dividend of 0.1p, I am nervous about the outstanding writ against the company. This matter has been dragging on for many months despite their attempts to resolve the matter out of court. A date has now been set for the trial on 8th December. This suggests to me that the Landlord has a very strong case, and any settlement either inside or outside of court could (imo) be very punitive for Densitron.
I'll continue to monitor the situation, and never say never, as the saying goes, but allied to recent inconsistent trading this one will remain on the monitor."
Whilst the management state that "the settlement is in the best interests of the group", no financial details have been disclosed and it appears that Densitron are still lumbered with the lease payments until an agent can find a suitable tenant.
I am guessing that the settlement is a hefty one, and then of course they will have incurred legal fees and are still liable for the rent of an unoccupied property.
In response to the news, the share price did move up a few percentage points surprisingly, but whilst Densitron's market cap. is very low, I can't see anything to get excited about and it will be interesting to see their balance sheet when they release their finals.
I really find it most odd that they state:-
"It was agreed that the details of the settlement would remain confidential but in essence the Company
has agreed to a settlement amount and the rectification of the lease at the current market rent. "Are they hoping to keep it secret forever? Will they just ignore it in their final results?
Perhaps they've forgotten that their shareholders are part owners of the company. Bizarre.
Personally, I wouldn't touch this company with a bargepole in the future following this fiasco.
How much longer before the current Bull Market runs out of steam?
Well it's full steam ahead for the current Bull market which has been running for five years now. Surely it's time for a correction. Well possibly, but as I commented back in February, I think that this Bull run might continue well beyond some of the most optimistic forecasters predictions.
Why do I believe this? For very simplistic reasons. Firstly, the 2008-2009 market capitulation was extremely severe. Stock prices were pummelled so much that some quite ridiculously low valuations were created by investor panic and forced selling. At the time, I stated that I believed that this had created the investing opportunity of a lifetime, and for many investors this has certainly been the case.
Whilst some stocks are clearly running ahead of themselves, and it's becoming more difficult to find outstanding bargains, they haven't completely disappeared and with a few exceptions, valuations of many UK companies are relatively modest. Euphoria is still some distance away.
Significantly though, true global economic recovery is yet to appear, and when it does earnings for many UK companies may rise significantly. During the recession, companies that survived have become leaner and more efficient and some have benefitted from competitors going to the wall.
Furthermore, low interest rates still prevail. Where else do you invest your money? Gold, coins, wine...? No thanks.
Finally, bears will argue the risk comes from the withdrawal of quantitative easing in the US and interest rates rising sooner than expected. Surely these circumstances will only occur when it is clear that economic recovery is assured and sustained. Doesn't this bring us back to improving earnings for many of our leaner and meaner companies? Indeed many companies on modest earnings ratings may look cheap again as recovery takes a stronger foothold.
Anyway, we shall see, and as stated in a previous blog:-
http://michae1mouse.blogspot.co.uk/2013/02/datong-up-for-sale-markets-overheating.html
"As a long term investor and stock picker I'm only ever concerned whether or not the stocks I hold are undervalued or overvalued, if it's the former then I continue to hold and acquire and if it's the latter then I sell."
There is a good article written in the FT today by Dominic Picarda.
http://www.ft.com/cms/s/0/9e8d7730-3c97-11e3-86ef-00144feab7de.html#axzz2iqAZvLz8
"I would not be at all surprised if UK equities produced double-digit annualised returns over the coming five years".
Anyway, it's a bit of a mugs game predicting the direction of the markets and my next blog will stick with my stock picking experiences and news stories that have been released recently.
Why do I believe this? For very simplistic reasons. Firstly, the 2008-2009 market capitulation was extremely severe. Stock prices were pummelled so much that some quite ridiculously low valuations were created by investor panic and forced selling. At the time, I stated that I believed that this had created the investing opportunity of a lifetime, and for many investors this has certainly been the case.
Whilst some stocks are clearly running ahead of themselves, and it's becoming more difficult to find outstanding bargains, they haven't completely disappeared and with a few exceptions, valuations of many UK companies are relatively modest. Euphoria is still some distance away.
Significantly though, true global economic recovery is yet to appear, and when it does earnings for many UK companies may rise significantly. During the recession, companies that survived have become leaner and more efficient and some have benefitted from competitors going to the wall.
Furthermore, low interest rates still prevail. Where else do you invest your money? Gold, coins, wine...? No thanks.
Finally, bears will argue the risk comes from the withdrawal of quantitative easing in the US and interest rates rising sooner than expected. Surely these circumstances will only occur when it is clear that economic recovery is assured and sustained. Doesn't this bring us back to improving earnings for many of our leaner and meaner companies? Indeed many companies on modest earnings ratings may look cheap again as recovery takes a stronger foothold.
Anyway, we shall see, and as stated in a previous blog:-
http://michae1mouse.blogspot.co.uk/2013/02/datong-up-for-sale-markets-overheating.html
"As a long term investor and stock picker I'm only ever concerned whether or not the stocks I hold are undervalued or overvalued, if it's the former then I continue to hold and acquire and if it's the latter then I sell."
There is a good article written in the FT today by Dominic Picarda.
http://www.ft.com/cms/s/0/9e8d7730-3c97-11e3-86ef-00144feab7de.html#axzz2iqAZvLz8
"I would not be at all surprised if UK equities produced double-digit annualised returns over the coming five years".
Anyway, it's a bit of a mugs game predicting the direction of the markets and my next blog will stick with my stock picking experiences and news stories that have been released recently.
Saturday 12 October 2013
Trakm8 acquires Box - a good deal?
This week TRAKM8, a company that I have mentioned several times on my blog, announced a proposed reverse takeover of BOX TELEMATICS, one of the UK leading providers of fleet management systems. The acquisition comprises an initial cash consideration of £3.5m plus the repayment of a Director's loan of £750,000.
The acquisition is being funded from TRAKM8's cash reserves, a new debt facility of £2.5m and a subscription by the Directors for new ordinary shares at a price of 22p to raise £720,000. They will also raise £1.35m through a placing at 22p for additional working capital purposes.
Is this a good deal for TRAKM8's existing shareholders?
On the face of it, it looks like an outstanding deal.
Firstly, BOX brings with it £8.4m in revenues and profit before tax of £850,000 (2012). The combined group will boast revenues in excess of £13m (based on 2012 figures) which I would expect to rise substantially in future years. I'm not going to guess at profit, but suffice to say, with the enhanced business opportunities and cost savings for the enlarged group, I would expect profits to be very healthy indeed alongside strong cash flows.
The market reacted very positively to the deal and the share price leapt up over 40% on the news, but even at 29.25p per share the combined group has a market cap. of just £8.5m, and looks a snip at that price to me.
Both groups have a very strong and healthy recurring revenue base, and TRAKM8 will also have access to BOX's manufacturing and assembly facilities which should help to improve margins for the combined group. In 2012 TRAKM8's gross margins had improved to 72%. In addition BOX brings with it a Blue Chip client base.
The enlarged group will further benefit from synergies, cross-selling opportunities and scale advantages.
I like TRAKM8's management and believe that they have secured an excellent acquisition here to enhance their organic growth. The Director's take relatively modest salaries whilst seemingly always purchasing shares above the market price, indeed the current placing with institutions and Directors was at a small premium to the share price before the announcement.
They also have a substantial amount of 'skin in the game' and hold around 55% of the enlarged group's share capital. Such a large stake would make me nervous in certain circumstances, but the great thing about this company is that the Director's have consistently shown that they act in the best interests of all shareholders.
Finally John Watkins, Chief Executive Officer had this to say about the deal:-
The acquisition is being funded from TRAKM8's cash reserves, a new debt facility of £2.5m and a subscription by the Directors for new ordinary shares at a price of 22p to raise £720,000. They will also raise £1.35m through a placing at 22p for additional working capital purposes.
Is this a good deal for TRAKM8's existing shareholders?
On the face of it, it looks like an outstanding deal.
Firstly, BOX brings with it £8.4m in revenues and profit before tax of £850,000 (2012). The combined group will boast revenues in excess of £13m (based on 2012 figures) which I would expect to rise substantially in future years. I'm not going to guess at profit, but suffice to say, with the enhanced business opportunities and cost savings for the enlarged group, I would expect profits to be very healthy indeed alongside strong cash flows.
The market reacted very positively to the deal and the share price leapt up over 40% on the news, but even at 29.25p per share the combined group has a market cap. of just £8.5m, and looks a snip at that price to me.
Both groups have a very strong and healthy recurring revenue base, and TRAKM8 will also have access to BOX's manufacturing and assembly facilities which should help to improve margins for the combined group. In 2012 TRAKM8's gross margins had improved to 72%. In addition BOX brings with it a Blue Chip client base.
The enlarged group will further benefit from synergies, cross-selling opportunities and scale advantages.
I like TRAKM8's management and believe that they have secured an excellent acquisition here to enhance their organic growth. The Director's take relatively modest salaries whilst seemingly always purchasing shares above the market price, indeed the current placing with institutions and Directors was at a small premium to the share price before the announcement.
They also have a substantial amount of 'skin in the game' and hold around 55% of the enlarged group's share capital. Such a large stake would make me nervous in certain circumstances, but the great thing about this company is that the Director's have consistently shown that they act in the best interests of all shareholders.
Finally John Watkins, Chief Executive Officer had this to say about the deal:-
"The acquisition of BOX is a significant milestone for Trakm8, bringing strong financial and strategic benefits as it will enable us to exploit the growing demand for vehicle telematics in a fragmented market place.
"We have been delighted by the positive reaction to acquire this profitable and complementary business and furthermore are pleased to welcome a number of high quality UK institutions to our share register."
As ever, no advice is intended or given.
Saturday 28 September 2013
Hopeless cases portfolio takes the lead!!!
Time to re-visit the battle between the FTSE-250 vs. the hopeless cases portfolio which I started back in August 2011:-
http://michae1mouse.blogspot.co.uk/2011/08/very-little-research-but-are-these.html
Whilst the FTSE-250 has done well with a current return of 48.9%, I can reveal that the hopeless cases portfolio has now taken the lead with a gain of 51.6%.
The two top performers (by far) in the portfolio remain ITV and Thomas Cook with gains of 215% and 239% respectively, then comes Vodafone with a gain of 33%. Vodafone has recently risen on the back of it's Verizon Wireless disposal, and shareholders will have had and will still receive substantial amounts of cash back from dividend and special dividend payments.
Next up is Aviva with gains of 26% and 24% respectively. As mentioned in previous blogs I reinvested the profits from the Cable and Wireless takeover into more Aviva shares.
Cable and Wireless Communications is up 22%, leaving Man Group as the worst performer in the portfolio, down by 58% (not forgetting that Game Group went bust).
I don't hold shares in any of the hopeless cases portfolio, and it was started just for a bit of fun. It will be interesting to track it's performance over the next two years though and see what lies in store for the remaining six companies. Please note that I have not taken into account any dividends paid in my calculations, and the comparison is strictly on capital gains.
On another note, there is a great article by John Lee in the FT Money section today on small cap investment. He writes as follows:- "I believe there are two key prerequisites for investment: common sense and patience. When stock selecting, I seek six characteristics: a stable, experienced board with significant directors' shareholdings; cash positive with low levels of debt, and preferably good asset backing; profitable companies with a record of paying a dividend; firms registered in the UK with British governance and audit standards, but with global turnover; a trading activity that I can understand; and optimistic recent comments made by the chairman or chief executive."
Couldn't agree more John. I can't say that I always follow the above criteria to the letter, but for me to make a substantial investment in a company then most of the above is an absolute must.
I've just noticed that John Lee has a book coming out in December entitled, "How to make a million - Slowly". Certainly one that I will buy. It's a shame that he doesn't write a regular column anymore.
http://michae1mouse.blogspot.co.uk/2011/08/very-little-research-but-are-these.html
Whilst the FTSE-250 has done well with a current return of 48.9%, I can reveal that the hopeless cases portfolio has now taken the lead with a gain of 51.6%.
The two top performers (by far) in the portfolio remain ITV and Thomas Cook with gains of 215% and 239% respectively, then comes Vodafone with a gain of 33%. Vodafone has recently risen on the back of it's Verizon Wireless disposal, and shareholders will have had and will still receive substantial amounts of cash back from dividend and special dividend payments.
Next up is Aviva with gains of 26% and 24% respectively. As mentioned in previous blogs I reinvested the profits from the Cable and Wireless takeover into more Aviva shares.
Cable and Wireless Communications is up 22%, leaving Man Group as the worst performer in the portfolio, down by 58% (not forgetting that Game Group went bust).
I don't hold shares in any of the hopeless cases portfolio, and it was started just for a bit of fun. It will be interesting to track it's performance over the next two years though and see what lies in store for the remaining six companies. Please note that I have not taken into account any dividends paid in my calculations, and the comparison is strictly on capital gains.
On another note, there is a great article by John Lee in the FT Money section today on small cap investment. He writes as follows:- "I believe there are two key prerequisites for investment: common sense and patience. When stock selecting, I seek six characteristics: a stable, experienced board with significant directors' shareholdings; cash positive with low levels of debt, and preferably good asset backing; profitable companies with a record of paying a dividend; firms registered in the UK with British governance and audit standards, but with global turnover; a trading activity that I can understand; and optimistic recent comments made by the chairman or chief executive."
Couldn't agree more John. I can't say that I always follow the above criteria to the letter, but for me to make a substantial investment in a company then most of the above is an absolute must.
I've just noticed that John Lee has a book coming out in December entitled, "How to make a million - Slowly". Certainly one that I will buy. It's a shame that he doesn't write a regular column anymore.
Saturday 21 September 2013
Angle rumours and further Director buys at Avanti
It's been a fairly quiet week regarding news stories for shares that I hold, but considerable excitement was generated by a story in 'The Times' on Tuesday, suggesting that potential suitors were circling Angle with the possibility of making an offer(s) in the region of £2 plus.
http://www.thetimes.co.uk/tto/business/columnists/article3871158.ece
"London’s “hot money”, those fast chaps who hunt lucrative takeovers, think they have found an angle.
Angle plc is a small, AIM-quoted, biotechnology company that largely flies under the radar. However, there were whispers yesterday that it had been tapped up, so far informally, by more than one potential bidder. No names were mentioned, but any number of bigger healthcare players may be interested.
As well as specialising in foetal health, Angle owns a subsidiary, Parsortix, which has developed a clever technique to separate blood cells to test for cancer and which already has a patent in America. Angle bulls expect Parsortix to be granted regulatory approval there by the middle of next year, about six months after it receives the green light in Europe.
Though the shares edged a ha’penny lower to 73p yesterday, they have jumped by nearly 25 per cent since the start of this month. At about the same time, trading volumes, the number of shares changing hands, also spiked, itself often a signal that something may be afoot.
The rumoured price that potential buyers have indicated they may be prepared to pay is above 200p, still some distance north of where Angle shares are trading now."
The share price currently stands at 81p. I mentioned Angle as one of my speculative buys back in December 2012, and certainly it appears to be paying off handsomely at the moment.
http://michae1mouse.blogspot.co.uk/2012/12/a-new-angle.html
It seems highly unlikely that the Times would publish the above article without some reliable information, and the company's silence since the article was published appears to speak volumes. Whilst £2+ would be a massive premium to my 27p purchase price, the greedy part of me says that if big healthcare players are prepared to pay £2+ now, what would Angle be worth in a few years time. Many, many multiples of this I expect. However, this assumes that the product will be a raging success and that Angle have the wherewithal and clout to bring shareholders maximum returns by going it alone. Also, regulatory approvals have not been won just yet and validation of the Parsortix device's capabilities are still being awaited from the Paterson Institute.
If the rumours are true, it is a difficult decision for Angle's Directors. Either way it is beginning to look like shareholders will be richly rewarded, although "never count your chickens", as they say.
In other news I noticed that there was a further Director purchase at Avanti Communications on Friday where John Brackenbury, Chairman, bought a further £85,000 worth. The share price has risen well above it's recent lows, but if the company can retain momentum then the shares still have considerable upside potential.
http://www.thetimes.co.uk/tto/business/columnists/article3871158.ece
"London’s “hot money”, those fast chaps who hunt lucrative takeovers, think they have found an angle.
Angle plc is a small, AIM-quoted, biotechnology company
that largely flies under the radar. However, there were whispers yesterday that it had been tapped up, so far informally, by more than one potential bidder. No names were mentioned, but any number of bigger healthcare players may be interested.As well as specialising in foetal health, Angle owns a subsidiary, Parsortix, which has developed a clever technique to separate blood cells to test for cancer and which already has a patent in America. Angle bulls expect Parsortix to be granted regulatory approval there by the middle of next year, about six months after it receives the green light in Europe.
Though the shares edged a ha’penny lower to 73p yesterday, they have jumped by nearly 25 per cent since the start of this month. At about the same time, trading volumes, the number of shares changing hands, also spiked, itself often a signal that something may be afoot.
The rumoured price that potential buyers have indicated they may be prepared to pay is above 200p, still some distance north of where Angle shares are trading now."
The share price currently stands at 81p. I mentioned Angle as one of my speculative buys back in December 2012, and certainly it appears to be paying off handsomely at the moment.
http://michae1mouse.blogspot.co.uk/2012/12/a-new-angle.html
It seems highly unlikely that the Times would publish the above article without some reliable information, and the company's silence since the article was published appears to speak volumes. Whilst £2+ would be a massive premium to my 27p purchase price, the greedy part of me says that if big healthcare players are prepared to pay £2+ now, what would Angle be worth in a few years time. Many, many multiples of this I expect. However, this assumes that the product will be a raging success and that Angle have the wherewithal and clout to bring shareholders maximum returns by going it alone. Also, regulatory approvals have not been won just yet and validation of the Parsortix device's capabilities are still being awaited from the Paterson Institute.
If the rumours are true, it is a difficult decision for Angle's Directors. Either way it is beginning to look like shareholders will be richly rewarded, although "never count your chickens", as they say.
In other news I noticed that there was a further Director purchase at Avanti Communications on Friday where John Brackenbury, Chairman, bought a further £85,000 worth. The share price has risen well above it's recent lows, but if the company can retain momentum then the shares still have considerable upside potential.
Sunday 15 September 2013
Updates - Avanti, Avesco and ISG
It's been a busy week for news flow from some of the companies that I own shares in or have written about in the past.
Firstly, starting with Avanti Communications. This is one of my more speculative investments, and I have mentioned it several times on my blog. The shares nosedived following their most recent trading statement, but after publication of their prelims this week, the shares have bounced back by over 30%. You need a strong stomach to invest in these type of stocks since at the early stages in their development, the share price movements can be volatile and highly unpredictable. I try generally to think long term, and I'm talking several years not months.. I try to buy when the risk/reward ratio looks favourable and just hold on unless I feel the story has changed so much that I have lost all faith in the company.
In Avanti's case, I have held on and now believe it could be a multi-bagger from these levels. The key to my cautious optimism is that they have recently turned cash-flow positive, they are picking up blue-chip customers and from the finals:-
"with £39 million of cash on the balance sheet at year end and operating cashflow positive reached in June, we have the comfort of sufficient cash to cover debt repayments for two years. We plan to meet those obligations from cash generated from operations and with Backlog in FYE 2014 of £42 million, we expect to generate strong positive cash flow from operations this year."
Directors picked up around a quarter of a million pounds worth of shares between them following the results, and have been consistent buyers over many months. This further adds to my renewed confidence.
Next up, Avesco. This has been an outstanding investment for me, not least with a bit of good fortune from the Disney pay-out which they intend to distribute to shareholders in December. Whilst their third quarter trading update wasn't great, the balance sheet more than makes up for it.
I still believe that Avesco is significantly undervalued with the shares standing at £2.13 and NAV of £3.09 made up of quality assets. This is a cash generative company that is yet to benefit from improving conditions in the world economy. If you couple that with the even year effect then shareholders might reasonably anticipate (as indicated) a progressive dividend policy. Strip out the £1.10 cashback to shareholders in December, and I expect this year's dividend to be around the 5% mark and rising in future years. I still believe that you are pretty much getting one of the market leaders in it's sector for nothing, and merely paying for it's assets. Many sector peers are priced at a premium to NAV, Avesco at a significant discount. I also wouldn't discount Private Equity interest in Avesco at some point in the not too distant future.
It's worth noting that trading profit for the 9 month period was £3.8m compared to £4.1m in 2012 (Olympic year). The shortfall in operating profit against last year is due to a one off cost of just over £3m from payments to LTIP holders and bonuses in connection with the Disney settlement.
Finally, 2014 is an even year which should boost profits substantially. Quite frankly in more than ten years of investing on the stock market I can't remember a situation where a profitable, cash generative and growing company(long term) with a NAV of £80m (mostly quality tangible assets) and £48m of cash on the balance sheet is valued at just £55m.
Finally, just a brief mention about Interior Services Group which I reported on last year:-
http://michae1mouse.blogspot.co.uk/2012/10/interior-services-group_4968.html
They also released their finals this week with improved underlying profits, net cash and order book.
The outlook is encouraging. From the CEO :-
Firstly, starting with Avanti Communications. This is one of my more speculative investments, and I have mentioned it several times on my blog. The shares nosedived following their most recent trading statement, but after publication of their prelims this week, the shares have bounced back by over 30%. You need a strong stomach to invest in these type of stocks since at the early stages in their development, the share price movements can be volatile and highly unpredictable. I try generally to think long term, and I'm talking several years not months.. I try to buy when the risk/reward ratio looks favourable and just hold on unless I feel the story has changed so much that I have lost all faith in the company.
In Avanti's case, I have held on and now believe it could be a multi-bagger from these levels. The key to my cautious optimism is that they have recently turned cash-flow positive, they are picking up blue-chip customers and from the finals:-
"with £39 million of cash on the balance sheet at year end and operating cashflow positive reached in June, we have the comfort of sufficient cash to cover debt repayments for two years. We plan to meet those obligations from cash generated from operations and with Backlog in FYE 2014 of £42 million, we expect to generate strong positive cash flow from operations this year."
Directors picked up around a quarter of a million pounds worth of shares between them following the results, and have been consistent buyers over many months. This further adds to my renewed confidence.
Next up, Avesco. This has been an outstanding investment for me, not least with a bit of good fortune from the Disney pay-out which they intend to distribute to shareholders in December. Whilst their third quarter trading update wasn't great, the balance sheet more than makes up for it.
I still believe that Avesco is significantly undervalued with the shares standing at £2.13 and NAV of £3.09 made up of quality assets. This is a cash generative company that is yet to benefit from improving conditions in the world economy. If you couple that with the even year effect then shareholders might reasonably anticipate (as indicated) a progressive dividend policy. Strip out the £1.10 cashback to shareholders in December, and I expect this year's dividend to be around the 5% mark and rising in future years. I still believe that you are pretty much getting one of the market leaders in it's sector for nothing, and merely paying for it's assets. Many sector peers are priced at a premium to NAV, Avesco at a significant discount. I also wouldn't discount Private Equity interest in Avesco at some point in the not too distant future.
It's worth noting that trading profit for the 9 month period was £3.8m compared to £4.1m in 2012 (Olympic year). The shortfall in operating profit against last year is due to a one off cost of just over £3m from payments to LTIP holders and bonuses in connection with the Disney settlement.
Finally, 2014 is an even year which should boost profits substantially. Quite frankly in more than ten years of investing on the stock market I can't remember a situation where a profitable, cash generative and growing company(long term) with a NAV of £80m (mostly quality tangible assets) and £48m of cash on the balance sheet is valued at just £55m.
Finally, just a brief mention about Interior Services Group which I reported on last year:-
http://michae1mouse.blogspot.co.uk/2012/10/interior-services-group_4968.html
They also released their finals this week with improved underlying profits, net cash and order book.
The outlook is encouraging. From the CEO :-
"ISG has delivered an improved performance and growing order book.
In the UK, we have seen signs of improvement in the London office fit out market and have maintained our market leading positions in the office fit out and retail sectors. We have had considerable success in the data center sector. Our UK Construction business has increased its level of repeat work through its focus on key customers and frameworks.
Overseas, our businesses are performing well and we are entering new markets and strengthening our existing presence through selective acquisitions.
We are looking forward to the future with growing confidence."
The dividend is 9p for the full year. I mentioned the shares at around £1.35 and they currently stand at £2.29 (up 70%).
Right, I'm off to watch Dragon's Den.
As ever, no advice intended or given.
Sunday 8 September 2013
Avation - a trading buy? and Belgravium Technologies
I might be missing something but Avation (AVAP) looks
overlooked and extremely undervalued?
The company, which is essentially an aircraft procurement and leasing company, released their results at the end of August where they
significantly beat market expectations with earnings of $23.25 per share or
around 15p. This means that the shares are currently trading on a p/e ratio of
around 6. The outlook for 2014 is very positive, and the company have just
introduced their first dividend alongside plans for a progressive dividend
policy. Directors have been helping themselves to the shares in the open market
and the company appears to be highly cash generative.
The company boasts a NAV above the current market cap of
around £40m, and whilst there is significant debt on the balance sheet given
that it’s a capital intensive company, I do like everything else about them and
have bought the shares.
Unusually for me I felt that this was a trading buy and
believe the shares have possibly 50% or more upside in the short term. This is based on a very reasonable 8/9 times
this year’s 15p earnings.
As I said there may be something I have seriously
overlooked, but the Director’s confidence suggests otherwise.
Belgravium Technologies also released their interim results on
Wednesday, and I am encouraged by the narrative which hints at an improved
performance for the full year, and cautious optimism for the future. The EPS
figure for 2012 was 0.33p which puts the shares on a p/e ratio of 10.6. This
looks cheap given any growth this year and in future years. The company also pays a dividend around 3%. They
have stated in the interims that a dividend is highly likely to be paid again
this year given that cash generation is good, and despite having used funds for
a recent acquisition. This is a long term hold for me and I have previously commented
on BVM below:-
Needless to say, no advice is intended or given and please
do your own research.
Friday 30 August 2013
Sexy is as sexy does!!
Who on earth would be interested in buying shares in a boring old shipping services company when there are so many other sexy options to choose from?
Well in 2002 that's exactly what I did, purchasing shares in Clarkson for around £2 a piece.
It was really my first serious foray into the stock market. I had dabbled between 1999 and 2002, but not seriously and with little background reading to guide me. In retrospect this was an invaluable lesson since the subsequent unwinding of the dotcom bubble and general market collapse made me realise that some serious research was necessary before gambling hard earned cash on the markets. Thank goodness I did some research and started to learn about p/e ratios, dividend yields, balance sheets, net asset values etc. Most of all thank goodness for Ben Graham and his principles of value investing.
Whilst I can't claim to have strictly adhered to Graham's principles over the last decade or more, I do try to look for at least some margin of safety.
In 2002, feeling pretty confident about Graham's ideas, I decided that one company that appeared to generally fit his value based criteria was a company called Clarkson. Whilst the markets were still somewhat volatile I decided to take the plunge and buy shares for about £2 a piece. The p/e ratio was low single digits, the dividend yield just over 7% and the company had no debt. What could possibly go wrong?
You can only imagine my dismay and despondency when the share price subsequently fell further to around £1.50.
I tried not to panic and held on, consoling myself with the fact that at least I would get some money back through dividend payments, but I did question myself, wondering if I had totally misunderstood the principles of value investing and margin of safety.
Luckily as markets began to pick up so did Clarkson's share price, and initially just getting back to break even was a huge relief, but I continued to hold. I received my 7.2% dividend and eventually sold my holding for a profit of 67%. What a result I thought at the time, and let's face it where else are you going to invest and get that sort of return in the space of a year or so? Other successes followed, notably Ashtead and Hunting, both bought for 15p and 114p respectively and sold for double digit percentage profits after a relatively modest holding period (I know, I know.......but nothing teaches like experience) and from that point on I was totally hooked on stock market investment and still am.
But who really wants to hold on to these boring companies, particularly when you've made a great profit in no time at all? I mean what's happened to Clarkson for instance since 2002?
Well firstly the share price is now £19.75. It's nearly ten-bagged in 11 years. That's a compounded rate of 23% per annum just in capital appreciation. £100,000 invested would now be worth £987,500.
Pretty impressive, but let's now consider the dividends paid out during that period.
Firstly, Clarkson have clearly operated a progressive dividend policy. When I bought the shares the dividend was 15p per share, but the dividend has increased year-on-year and currently it stands at 51p. Sticking with the assumed £100,000 invested, dividend payments amount to nearly £200,000 (£199,250), twice the original investment.
Whilst I wouldn't be tempted to buy shares in Clarkson now (it looks expensive on first glance to me), it does illustrate three things. Firstly, value investing can be extremely rewarding, secondly, with prudent stock selection, buy and hold can work very well and thirdly boring companies can be very sexy indeed!!
Well in 2002 that's exactly what I did, purchasing shares in Clarkson for around £2 a piece.
It was really my first serious foray into the stock market. I had dabbled between 1999 and 2002, but not seriously and with little background reading to guide me. In retrospect this was an invaluable lesson since the subsequent unwinding of the dotcom bubble and general market collapse made me realise that some serious research was necessary before gambling hard earned cash on the markets. Thank goodness I did some research and started to learn about p/e ratios, dividend yields, balance sheets, net asset values etc. Most of all thank goodness for Ben Graham and his principles of value investing.
Whilst I can't claim to have strictly adhered to Graham's principles over the last decade or more, I do try to look for at least some margin of safety.
In 2002, feeling pretty confident about Graham's ideas, I decided that one company that appeared to generally fit his value based criteria was a company called Clarkson. Whilst the markets were still somewhat volatile I decided to take the plunge and buy shares for about £2 a piece. The p/e ratio was low single digits, the dividend yield just over 7% and the company had no debt. What could possibly go wrong?
You can only imagine my dismay and despondency when the share price subsequently fell further to around £1.50.
I tried not to panic and held on, consoling myself with the fact that at least I would get some money back through dividend payments, but I did question myself, wondering if I had totally misunderstood the principles of value investing and margin of safety.
Luckily as markets began to pick up so did Clarkson's share price, and initially just getting back to break even was a huge relief, but I continued to hold. I received my 7.2% dividend and eventually sold my holding for a profit of 67%. What a result I thought at the time, and let's face it where else are you going to invest and get that sort of return in the space of a year or so? Other successes followed, notably Ashtead and Hunting, both bought for 15p and 114p respectively and sold for double digit percentage profits after a relatively modest holding period (I know, I know.......but nothing teaches like experience) and from that point on I was totally hooked on stock market investment and still am.
But who really wants to hold on to these boring companies, particularly when you've made a great profit in no time at all? I mean what's happened to Clarkson for instance since 2002?
Well firstly the share price is now £19.75. It's nearly ten-bagged in 11 years. That's a compounded rate of 23% per annum just in capital appreciation. £100,000 invested would now be worth £987,500.
Pretty impressive, but let's now consider the dividends paid out during that period.
Firstly, Clarkson have clearly operated a progressive dividend policy. When I bought the shares the dividend was 15p per share, but the dividend has increased year-on-year and currently it stands at 51p. Sticking with the assumed £100,000 invested, dividend payments amount to nearly £200,000 (£199,250), twice the original investment.
Whilst I wouldn't be tempted to buy shares in Clarkson now (it looks expensive on first glance to me), it does illustrate three things. Firstly, value investing can be extremely rewarding, secondly, with prudent stock selection, buy and hold can work very well and thirdly boring companies can be very sexy indeed!!
Wednesday 28 August 2013
Tuesday 27 August 2013
A quick commentary using audioboo
A brief mention of UBC Media, Access Intelligence, TRAKM8 and Avesco.
http://audioboo.fm/michae1mouse
http://audioboo.fm/michae1mouse
Monday 26 August 2013
@UK
@UK is currently a bulletin board favourite and has enjoyed a spectacular run in its share price over the past month or so, rising from a share price of around 5p to its current 38p. It's another great example of how an AIM micro-cap can suddenly capture investors imagination and multi-bag within a very short time. Of course the thing to watch out for is whether the rise is justified or simply a result of poor liquidity and over enthusiastic punters. At the current share price, @UK's market cap. is currently £32m.
I have been aware of this company for some considerable time. The price originally spiked from around 5p to 15p towards the end of 2012 and then slowly fell back again, and I did have a brief look at the fundamentals. Unfortunately I never invested. In truth I didn't and still don't really understand their business and the potential market, but as ever, well done to those who took the plunge and have seen their investment increase sevenfold in no time at all.
It appears that the excitement centres around two recent trading statements released by the company. The first one in early July stating:-
"We believe we have the platform in place and market opportunity to significantly grow the international arm of the business to become a truly global technology provider within the next 3 - 5 years, generating annual turnover of over GBP50 million of which approximately 80% will be derived internationally."
That is some claim, and if true, then even at £32m, @UK is still cheap with a long term view since I believe that their gross margins will remain high (currently 79%).
A further strong trading update was released in early August:-
http://uk.advfn.com/news/UKREG/2013/article/58690768
which contains lots of encouraging noises about trading in the second half. Investors appear excited about their tie-up with Visa and certainly this line is also encouraging :-
"Investment in the first half of the year to support the Visa roll-out resulted in movement into a net debt position, which has since been reversed.
The second half year has started strongly with significant cash generation to provide the funds for international rollout."
However, whilst the company could be cheap with a long term view and I may miss out on a multi-bagger (even from the current price), I'm unlikely to chase the shares since, as I have mentioned in previous blogs, I like to have at least some understanding of the business and I do like some margin of safety (with the majority of my investments).
I've briefly outlined the bull case for @UK, but there are bear points to be aware of. Firstly in my experience most companies (particularly small ones) have difficulty accurately predicting turnover and profits for the next 6 months let alone 3-5 years in advance. £50m turnover sounds impressive, but is it realistic and deliverable given that revenue in the past two years has hovered around £2m. In fairness with the Visa tie-up, and what I gather is a change in business model, then a comparison with previous figures may not be appropriate.
In the short term though, the price does look expensive, since despite the two very positive trading statements :- "Ronald Duncan, Executive Chairman, commented, "We are delighted with the progress made in the first half of the year, both financially and operationally, and expect to deliver full year results in line with market expectations."
Importantly market expectations are for earnings around 0.94p which puts the shares on a p/e ratio of more than 40. That said with explosive growth, and if they exceed expectations, then a quick look at ASOS's history will tell you that exceptional growth can mean companies stay on high multiples of earnings for very long periods.
Finally the business lost over £750,000 last year, and had negligible cash and net tangible assets, although for balance, it also had negligible debt, and as the trading statement points out, it is beginning to generate cash in the second half of this year.
In conclusion, apart from knowing that @UK operates in the cloud eCommerce marketplace, I don't fully understand the potential going forward and as a consequence will pass on this opportunity.
I have no idea how things will pan out over the next few years, but given my interest in the AIM market, I will be following with interest to see how things develop.
Good luck to the company and investors, and as always, this remains a blog recording my personal thoughts and experiences of investing in the stock market and no advice is ever intended or given.
I have been aware of this company for some considerable time. The price originally spiked from around 5p to 15p towards the end of 2012 and then slowly fell back again, and I did have a brief look at the fundamentals. Unfortunately I never invested. In truth I didn't and still don't really understand their business and the potential market, but as ever, well done to those who took the plunge and have seen their investment increase sevenfold in no time at all.
It appears that the excitement centres around two recent trading statements released by the company. The first one in early July stating:-
"We believe we have the platform in place and market opportunity to significantly grow the international arm of the business to become a truly global technology provider within the next 3 - 5 years, generating annual turnover of over GBP50 million of which approximately 80% will be derived internationally."
That is some claim, and if true, then even at £32m, @UK is still cheap with a long term view since I believe that their gross margins will remain high (currently 79%).
A further strong trading update was released in early August:-
http://uk.advfn.com/news/UKREG/2013/article/58690768
which contains lots of encouraging noises about trading in the second half. Investors appear excited about their tie-up with Visa and certainly this line is also encouraging :-
"Investment
in the first half of the year to support the Visa roll-out resulted in movement into a net debt position, which has since been reversed.The second half year has started strongly with significant cash generation to provide the funds
for international rollout."However, whilst the company could be cheap with a long term view and I may miss out on a multi-bagger (even from the current price), I'm unlikely to chase the shares since, as I have mentioned in previous blogs, I like to have at least some understanding of the business and I do like some margin of safety (with the majority of my investments).
I've briefly outlined the bull case for @UK, but there are bear points to be aware of. Firstly in my experience most companies (particularly small ones) have difficulty accurately predicting turnover and profits for the next 6 months let alone 3-5 years in advance. £50m turnover sounds impressive, but is it realistic and deliverable given that revenue in the past two years has hovered around £2m. In fairness with the Visa tie-up, and what I gather is a change in business model, then a comparison with previous figures may not be appropriate.
In the short term though, the price does look expensive, since despite the two very positive trading statements :- "Ronald Duncan, Executive Chairman, commented, "We are delighted with the progress made in the first half of the year, both financially and operationally, and expect to deliver full year results in line with market expectations."
Importantly market expectations are for earnings around 0.94p which puts the shares on a p/e ratio of more than 40. That said with explosive growth, and if they exceed expectations, then a quick look at ASOS's history will tell you that exceptional growth can mean companies stay on high multiples of earnings for very long periods.
Finally the business lost over £750,000 last year, and had negligible cash and net tangible assets, although for balance, it also had negligible debt, and as the trading statement points out, it is beginning to generate cash in the second half of this year.
In conclusion, apart from knowing that @UK operates in the cloud eCommerce marketplace, I don't fully understand the potential going forward and as a consequence will pass on this opportunity.
I have no idea how things will pan out over the next few years, but given my interest in the AIM market, I will be following with interest to see how things develop.
Good luck to the company and investors, and as always, this remains a blog recording my personal thoughts and experiences of investing in the stock market and no advice is ever intended or given.
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